$12,415,000 FOSSIL RIDGE METROPOLITAN DISTRICT NO. 3 (IN THE CITY OF LAKEWOOD, COLORADO) GENERAL OBLIGATION LIMITED TAX BONDS SERIES 2016

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1 TM NEW ISSUE BOOK-ENTRY-ONLY RATING: S&P Global Ratings BBB See ( MISCELLANEOUS Rating ) In the opinion of Greenberg Traurig, LLP, Bond Counsel, assuming continuing compliance with certain tax covenants, under existing statutes, regulations, rulings and court decisions, interest on the Bonds is excludable from gross income for federal income tax purposes. Further, interest on the Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations; however, such interest will be taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. See TAX MATTERS herein for a description of the federal alternative minimum tax on corporations and certain other federal tax consequences of ownership of the Bonds. Bond Counsel is further of the opinion that interest on the Bonds is exempt from Colorado income taxes and is not a specific preference item for purposes of the State of Colorado alternative minimum income tax for any period during which interest on the Bonds is not included in gross income for federal income tax purposes. See TAX MATTERS herein. $12,415,000 FOSSIL RIDGE METROPOLITAN DISTRICT NO. 3 (IN THE CITY OF LAKEWOOD, COLORADO) GENERAL OBLIGATION LIMITED TAX BONDS SERIES 2016 Dated: Date of Delivery Due: December 1, as shown below The Bonds are limited tax and special revenue obligations of Fossil Ridge Metropolitan District No. 3 ( District No. 3 ) secured by and payable from the Pledged Revenue, consisting of Property Taxes and Specific Ownership Taxes derived from the limited exercise of the ad valorem taxing power of District No. 3 and Fossil Ridge Metropolitan District No. 2 ( District No. 2 ). Under the Indenture (with respect to District No. 3) and the 2014 Funding Agreement (with respect to District No. 2), both District No. 3 and District No. 2 have covenanted to levy an ad valorem mill levy upon all taxable property of each respective District determined in accordance with the provisions thereof, but not less than 30 mills and not to exceed 50 mills (in the case of such 50 mill maximum, subject to certain adjustments described herein). The Bonds are secured by the Pledged Revenue on a parity with certain previously issued bonds of District No. 3 and Fossil Ridge Metropolitan District No. 1 ( District No. 1 ). The Bonds are also secured by amounts accumulated in the Surplus Fund, if any. Capitalized terms used on the cover page of this Official Statement and not otherwise defined shall have the meanings assigned them in the Introduction herein. The Bonds are being issued as fully registered obligations in the denomination of $5,000 or any integral multiple thereof. Interest on the Bonds is payable semiannually on June 1 and December 1 each year, commencing June 1, 2017, at the rates set forth below. MATURITY SCHEDULE CUSIP NO C 1, Maturity Date Principal Interest (December 1) Amount Rate Yield CUSIP 1, 2017 $150, % 1.74% AP , AQ , AR , AS7 $1,225, % Term Bond due December 1, 2026 Price % Yield 3.000% 2 CUSIP 34988C AT5 1, $3,045, % Term Bond due December 1, 2036 Price % Yield 4.080% 2 CUSIP 34988C AU2 1, $7,490, % Term Bond due December 1, 2046 Price % Yield 4.330% 2 CUSIP 34988C AV0 1, The Bonds are being issued pursuant to an Indenture of Trust dated as of December 1, 2016 between District No. 3 and UMB Bank, n.a, Denver, Colorado, as trustee. The Trustee will also act as Registrar and Paying Agent for the Bonds and DTC will act as securities depository for the Bonds. The Bonds will be issued in book-entry-only form and purchasers of the Bonds will not receive certificates evidencing their ownership interests in the Bonds. The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity at the prices and upon the terms set forth in this Official Statement. Proceeds from the sale of the Bonds will be used for the purposes of: (i) reimbursing a portion of the costs of acquiring, constructing, and installing certain public infrastructure improvements; and (ii) paying the costs of issuance of the Bonds. This cover page contains certain information for quick reference only. It is not a summary of this issue. Prospective purchasers of the Bonds must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Each prospective investor should read this entire Official Statement and should give particular attention to the section entitled RISK FACTORS. The Bonds are offered when, as and if issued by District No. 3, subject to prior sale, withdrawal or modification of the offer without notice and subject to the approval of legality by Greenberg Traurig, LLP, Denver, Colorado, as Bond Counsel, and certain other conditions. Certain matters will be passed upon by White Bear Ankele Tanaka & Waldron Professional Corporation, Centennial, Colorado, as General Counsel to District No. 3. Kutak Rock LLP, Denver, Colorado, is acting as Counsel to the Underwriter and, in such capacity, has assisted in the preparation of this Official Statement. The Bonds are expected to be available for delivery through the facilities of DTC on or about December 21, This Official Statement is dated December 14, District No. 3 takes no responsibility for the accuracy of the CUSIP number, which is included solely for the convenience of owners of the Bonds. 2 Bonds have been priced to yield as shown to the earliest call date of December 1, Copyright 2016 CUSIP Global Services. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on behalf of the American Bankers Association by S&P Capital IQ.

2 FOSSIL RIDGE METROPOLITAN DISTRICT NO. 3 Jefferson County, Colorado District No. 3 Board of Directors Marc Savela, President Jeffrey Becker, Vice President Ashley Tarufelli, Secretary/Treasurer John Corbett, Assistant Secretary Neil Simpson, Assistant Secretary General Counsel to the Districts White Bear Ankele Tanaka & Waldron Professional Corporation Centennial, Colorado Trustee and Paying Agent UMB Bank, n.a. Denver, Colorado Underwriter D.A. Davidson & Co. Denver, Colorado Bond Counsel Greenberg Traurig LLP Denver, Colorado Underwriter s Counsel Kutak Rock LLP Denver, Colorado

3 No dealer, salesman or other person has been authorized to give any information or to make any representation, other than the information contained in this Official Statement, in connection with the offering of the Bonds, and, if given or made, such information or representation must not be relied upon as having been authorized by District No. 3 or the Underwriter. The information in this Official Statement is subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder will, under any circumstances, create any implication that there has been no change in the affairs of District No. 3 since the date hereof. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized, or in which any person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. The Underwriter has provided the following sentence for inclusion within this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Investors must be willing and able to conduct an independent investigation of the risks attendant to ownership of the Bonds, including their own evaluation of the prospects for development within District No. 3. Neither the contents of this Official Statement nor any prior or subsequent communications from District No. 3 or any of its officers, directors, employees or agents constitute legal, tax, accounting or regulatory advice. Before purchasing, prospective investors should consult with their own legal counsel and business and tax advisors to determine the consequences of an investment in the Bonds and should make an independent evaluation of the investment. INTRODUCTION...1 Interest Rates; Payment...6 Provisions; Record Date...6 FORWARD LOOKING STATEMENTS...10 RISK FACTORS...10 General...10 Limited Obligations; No Conversion to Unlimited Mill Levy Pledge...10 No Mortgage...12 Risk of Reductions in Assessed Value; Market Value of Land...12 Additional Parity Bonds...12 No Acceleration...13 Potential Conflicts of Interest...13 Legal Constraints on District Operations...13 Enforcement of Property Tax Collection Remedies...15 Enforceability of Bondholders Remedies Upon Default...15 THE BONDS...16 Description...16 Sources of Payment...16 Authorized Denominations of the Bonds...16 Interest Rates; Payment Provisions...16 Prior Redemption...17 Application of Bond Proceeds...19 Security for the Bonds...19 Outstanding Parity Bonds...24 Certain Indenture Provisions...24 Debt Service Requirements Debt Service Coverage...35 THE DISTRICTS...35 Organization and Description...35 Multiple District Structure; Master IGA...36 District Powers...37 Governing Board...37 Administration...38 Facilities and Services Provided by the Financing Districts...39 Development Within the Districts...39 Material Agreements of the Districts...40 FINANCIAL INFORMATION OF THE DISTRICTS...43 Ad Valorem Property Taxes...43 Ad Valorem Property Tax Data...45 Overlapping Mill Levies...47 TABLE OF CONTENTS District Fees Specific Ownership Tax Operational Mill Levy; Funding of Operations Costs Financial Statements and District Funds Budget and Appropriation Procedure Deposit and Investment of District Funds Risk Management Constitutional Amendment Limiting Taxes and Spending DEBT STRUCTURE Required Elections General Obligation Debt General Obligation Debt Ratios LEGAL MATTERS Sovereign Immunity Recent Court of Appeals Case and Legislation Relating to District Elector Qualification Legal Representation Pending and Threatened Litigation Involving the Financing Districts Indenture Irrepealable Future Changes in Laws Limitations on Remedies Available to Bondholders TAX MATTERS General Original Issue Premium Information Reporting and Backup Withholding Future Legislation MISCELLANEOUS Rating Underwriting Registration of Bonds Undertaking To Provide Ongoing Disclosure Interest of Certain Persons Named in this Official Statement Independent Auditors Additional Information Official Statement Certification APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E Audited Financial Statements of the Districts as of and for the year ended December 31, 2015 Forms of Continuing Disclosure Undertakings Economic and Demographic Information Form of Bond Counsel Opinion Book-Entry-Only System Neither the Securities and Exchange Commission nor any securities regulatory authority of any state has approved or disapproved the Bonds or this Official Statement. Any representation to the contrary is unlawful. ii

4 INDEX OF TABLES TABLE Page I Debt Service Requirements...34 II History of District No. 2 s Assessed Valuation, Mill Levies and Property Tax Collections...45 III History of District No. 3 s Assessed Valuation, Mill Levy and Property Tax Collections...46 IV 2016 Assessed and Actual Valuation of Classes of Property in District No V 2016 Assessed and Actual Valuation of Classes of Property in District No VI Sample Total 2015 Mill Levy...47 VII District No. 1 History of General Fund Revenues, Expenditures and Changes in Fund Balance...50 VIII District No. 1 History of Debt Service Fund Revenues, Expenditures and Changes in Fund Balance...51 IX District No. 1 History of Capital Projects Fund Revenues, Expenditures and Changes in Fund Balance...51 X District No. 2 History of General Fund Revenues, Expenditures and Changes in Fund Balance...52 XI District No. 2 History of Debt Service Fund Revenues, Expenditures and Changes in Fund Balance...52 XII District No. 3 History of General Fund Revenues, Expenditures and Changes in Fund Balance...53 XIII District No. 3 History of Debt Service Fund Revenues, Expenditures and Changes in Fund Balance...53 XIV District No. 3 History of Capital Projects Fund Revenues, Expenditures and Changes in Fund Balance...54 XV District No. 1 General Fund Budget Summary and Comparison...55 XVI District No. 1 Debt Service Fund Budget Summary and Comparison...56 XVII District No. 1 Capital Projects Fund Budget Summary and Comparison...56 XVIII District No. 2 General Fund Budget Summary and Comparison...57 XIX District No. 2 Debt Service Fund Budget Summary and Comparison...57 XX District No. 3 General Fund Budget Summary and Comparison...58 XXI District No. 3 Debt Service FundBudget Summary and Comparison...58 XXII District No. 3 Capital Projects Fund Budget Summary and Comparison...59 XXIII Financing Districts Historical Debt Ratios...62 XXIV Estimated Overlapping General Obligation Debt...63 iii

5 MAP OF DISTRICT BOUNDARIES iv

6 REGIONAL VICINITY MAP v

7 INTRODUCTION This Official Statement is furnished to prospective purchasers of $12,415,000 General Obligation Limited Tax Bonds, Series 2016 (the Bonds ), issued by Fossil Ridge Metropolitan District No. 3, in the City of Lakewood, in Jefferson County, Colorado (the State ). The offering of the Bonds is made only by way of this Official Statement, which supersedes any other information or materials used in connection with the offer or sale of the Bonds. This Official Statement speaks only as of its date, and the information contained herein is subject to change. The information set forth in this Official Statement has been obtained from Fossil Ridge Metropolitan District No. 3 ( District No. 3 ), the Developer (defined hereafter), and from other sources believed to be reliable but is not guaranteed as to accuracy or completeness. This Official Statement, including the appendices hereto, contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions, or that they will be realized. See FORWARD LOOKING STATEMENTS and RISK FACTORS. The following introductory material is only a brief description of, and is qualified by, the more complete information contained throughout this Official Statement. A full review should be made of the entire Official Statement and the documents summarized or described herein. Changes from Preliminary Limited Offering Memorandum... The Districts... In addition to the interest rates and other information relating to the pricing of the Bonds set forth herein, this Official Statement contains certain changes from the Preliminary Official Statement dated December 7, Changes include: (i) deleting the sub-sections of Interest and Unpaid Principal and Interest under the section THE BONDS and replacing them with a new sub-section Interest Rates; Payment Provisions revising the description of the payment of interest and principal on the Bonds and adding the term Record Date to reflect when interest payments are due; (ii) adding an additional sentence at the end of THE BONDS Certain Indenture Provisions Surplus Fund to describe the use of moneys in the Surplus Fund upon the release of such fund; and (iii) replacing the proposed 2017 budget figures with the adopted 2017 budget figures. See THE BONDS Interest Rates; Payment Provisions. District No. 3, Fossil Ridge Metropolitan District No. 1 ( District No. 1 ), and Fossil Ridge Metropolitan District No. 2 ( District No. 2 and, together with District No. 1 and District No. 3, collectively, the Districts ) were created as part of a common plan to provide public improvements within and without the boundaries of the Development (defined hereafter), generally consisting of water, streets, traffic and safety controls, park and recreation, sanitation, mosquito and pest control, security, and covenant control improvements and facilities (as more particularly defined in the Service Plan, the Public Improvements ), to the extent authorized by a consolidated service plan for the Districts originally approved by the City Council of the City of Lakewood (the City Council ) on August 8, 2005, and subsequently amended and restated by a First Amended and Restated Service Plan and

8 a Second Amended and Restated Service Plan approved by City Council on August 28, 2006, and August 27, 2007, respectively. Such Second Amended and Restated Service Plan is referred to herein as the Service Plan. District No. 3 and District No. 2 are collectively referred to herein as the Financing Districts. The organization of the Districts was approved by the eligible electors of the Districts voting at the respective District elections held on November 7, The orders and decrees creating each of the Districts were entered by the Jefferson County District Court in September and October 2006, and recorded with the Jefferson County Clerk and Recorder on October 10, The Districts currently encompass approximately acres, located in the City of Lakewood (the City ) in Jefferson County (the County ), and generally bounded by State Highway C-470 on the west, West Yale Avenue on the south and West Alameda Parkway on the north, including all of the developed and developable property within the Development described below. See THE DISTRICTS District Powers Inclusions and Exclusions. The Financing Districts (defined below) currently have an estimated population of approximately 2,175 persons and a combined 2016 certified assessed valuation of $49,613,643. See THE DISTRICTS and the preceding MAP OF DISTRICT BOUNDARIES and REGIONAL VICINITY MAP. As contemplated by the Service Plan, in order to provide for the financing, construction, operation and maintenance of certain Public Improvements, the Districts executed the Master Intergovernmental District Facilities Construction and Service Agreement dated January 8, 2008 (the Master IGA ), pursuant to which District No. 1, serving as the Service District, is generally responsible for administering and managing the construction and operation of the Public Improvements, while District No. 3 and District No. 2, serving as the Financing Districts, are generally responsible for producing property tax and other revenue sufficient to pay the costs of operations and debt service expenses incurred for such Public Improvements. See THE DISTRICT Multiple District Structure; Master IGA. The Service Plan also provides that the Districts may enter into a regional improvement intergovernmental agreement, for the purpose of facilitating the financing and construction of regional improvements adjacent to, and surrounding the Development, although the Districts have not done so. As set forth in the Service Plan, the Districts are authorized to plan, design, acquire, construct, install, relocate, redevelop and finance the Public Improvements within and without the boundaries of the Districts. While the Service Plan anticipates that most Public Improvements provided by the Districts will be dedicated to the City or other appropriate governmental entity or owners association, the Districts are permitted to operate and maintain onsite recreational amenities as well as other Public Improvements not otherwise dedicated to the City or other 2

9 utility provider. See THE DISTRICTS Facilities and Services Provided by the Financing Districts. Development within the Financing Districts... The Financing Districts (comprising approximately acres) include all of the developed and developable property within an approximately 367-acre planned residential community commonly referred to as Solterra (referred to herein as the Development ). The Development is presently planned for 1,325 residential units. Construction in the Development began in The property within the District contains approximately 1,325 platted single family and multifamily lots. As of September 30, 2016, 1,046 lots, or 78.9% of the platted lots, had been sold to homebuilders, and 291 lots remained for sale by the Developer (defined below). Of the 1,046 lots which have been sold to homebuilders, approximately 870 homes have been completed and were occupied by homeowners (65.7% of the total platted lots). The remaining 176 lots owned by homebuilders are either for sale or are held by the homebuilders in inventory. Homebuilders currently active in the District include Cardel, Infinity, and Brookfield Residential. The Development also includes The Retreat, a community area comprised of an infinity edge pool, fitness area for professionally-taught classes, several patio areas, an outdoor fireplace, amphitheater and a clubhouse (including a large entertaining room and kitchen area with full appliances, bar and dining room). The Retreat is owned and managed by District No. 1. Development within the Financing Districts is being undertaken by Solterra LLC (the Developer ), as more particularly described in THE DISTRICTS Development Within the Districts. No assurance is given as to the timing or anticipated valuation of any future development within the Financing Districts. The feasibility of payment of the Bonds has been assessed by District No. 3 based solely on the existing aggregate assessed valuation of the Financing Districts without taking into account future development. This Official Statement does not purport to provide complete information material to the assessment of any future development within the Financing Districts and the Pledged Revenue (defined below) that may result therefrom. Issuance of the Bonds... The Bonds are being issued in full conformity with the constitution and laws of the State of Colorado, including Title 11, Article 57, Part 2, Colorado Revised Statutes, as amended (the Supplemental Public Securities Act ); Title 32, Article 1, Colorado Revised Statutes, as amended (the Special District Act ); pursuant to authorizing resolutions adopted by the District s Board of Directors (the Board ) prior to the issuance of the Bonds (the Bond Resolutions ); the Indenture of Trust dated as of December 1, 2016 (the Indenture ) between District No. 3 and UMB Bank, n.a., as trustee (the Trustee ); and pursuant to the District s authorizing election held on November 7, 2006 (the 2006 Election ). 3

10 Sources of Payment... The Bonds are limited tax and special limited revenue obligations of District No. 3 secured by and payable from the Trust Estate, including the Pledged Revenue comprised of all revenues derived from Property Taxes and Specific Ownership Taxes. As defined in the Indenture, Property Taxes means (i) the Required Mill Levy levied by District No. 3; (ii) the District No. 2 Required Mill Levy levied by District No. 2 and required to be remitted to District No. 3 or the Trustee pursuant to the 2014 Funding Agreement (defined below) and (iii) the ad valorem property taxes levied and collected or received by District No. 2 and District No. 3 pursuant to its mill levy and required to be remitted to District No. 1 or the Trustee pursuant to the 2010 Funding Agreement (defined below), entered into in connection with the issuance of District No. 1 s Series 2010 Bonds, described below. Specific Ownership Tax means, generally (as more particularly defined herein) the specific ownership taxes collected by the County and remitted to District No. 2 and District No. 3 pursuant to , C.R.S., or any successor statute, including such amounts remitted to District No. 2 required to be remitted to District No. 3 or the Trustee pursuant to the 2014 Funding Agreement, and such amounts remitted to District No. 2 and District No. 3 required to be remitted to District No. 1 or the Trustee pursuant to the 2010 Funding Agreement. Pursuant to the Indenture, District No. 3 is required to impose, and pursuant to a Joint Funding Agreement dated December 22, 2014 (as amended by a First Amendment thereto to be entered into prior to the date of issuance of the Bonds, the 2014 Funding Agreement ), entered into between the Financing Districts in connection with the issuance of District No. 3 s General Obligation Limited Tax Bonds, Series 2014 (the Series 2014 Bonds ), District No. 2 is required to impose, each year on all taxable property thereof an ad valorem property tax mill levy (referred to herein as the District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy, respectively) in an amount sufficient to fund the annual Estimated Debt Requirements (meaning the estimated amount of principal and interest on the Bonds, the Series 2010 Bonds and the Series 2014 Bonds) and the Annual Financing Costs (as defined herein, including principal and interest on the Bonds, the Series 2010 Bonds, the Series 2014 Bonds and any additional Parity Bonds (defined below), and replenishment of any reserve fund securing Parity Bonds (including the Series 2010 Bonds and Series 2014 Bonds)); provided that such mill levy is to be not less than 30 mills and not more than 50 mills (and, with respect to such 50 mills, subject to adjustment as provided herein). In no event is the District No. 2 Required Mill Levy imposed by District No. 2 or the District No. 3 Required Mill Levy imposed by District No. 3 permitted to exceed 50 mills, adjusted as described herein, or, subject to certain exceptions described herein, permitted to be imposed after January 1, In accordance with the Indenture, the 2010 Indenture (defined below), the 2014 Indenture (defined below), the 2010 Funding Agreement and the 4

11 2014 Funding Agreement, all Pledged Revenue is to be deposited with the Trustee and applied in accordance with the Indenture, the 2014 Indenture and the 2010 Indenture, as more particularly described in THE BONDS Certain Indenture Provisions Flow of Funds. See THE BONDS Security for the Bonds, and FINANCIAL INFORMATION OF THE DISTRICTS. The Bonds are also secured by amounts, if any, accumulated in the Surplus Fund up to the combined amount of the 2010 Maximum Surplus Amount ($820,000), the 2014 Maximum Surplus Amount ($871,500) and the 2016 Maximum Surplus Amount ($1,241,500). The Surplus Fund has a current balance of approximately $732,601; provided, however, that following payments on the Series 2010 Bonds and the Series 2014 Bonds on December 1, 2016, and application of the remaining excess Pledged Revenue in accordance with the 2010 Indenture and 2014 Indenture, the District projects there will remain approximately $1,250,250 on deposit in the Surplus Fund. See THE BONDS Certain Indenture Provisions Surplus Fund. The Surplus Fund was initially established by the 2010 Indenture and secures the Bonds, the Series 2010 Bonds, the Series 2014 Bonds and any Parity Bonds. THE BONDS ARE SOLELY THE OBLIGATIONS OF DISTRICT NO. 3 AND, PURSUANT TO AND SOLELY TO THE EXTENT OF ITS OBLIGATIONS UNDER THE 2014 FUNDING AGREEMENT, DISTRICT NO. 2. UNDER NO CIRCUMSTANCES SHALL ANY OF THE BONDS BE CONSIDERED OR HELD TO BE AN INDEBTEDNESS, OBLIGATION OR LIABILITY OF THE CITY OF LAKEWOOD, JEFFERSON COUNTY, THE STATE OF COLORADO OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE FINANCING DISTRICTS. Outstanding Parity Bonds... The Bonds are secured by a first lien (but not an exclusive first lien) on the Pledged Revenue. Pursuant to an Indenture of Trust dated as of September 1, 2010 (as amended and supplemented by a First Amendment thereto dated as of December 1, 2014, the 2010 Indenture ) between District No. 1 and the Trustee, District No. 1 has previously issued its Tax Supported Revenue Refunding Bonds, Series 2010 (the Series 2010 Bonds ). The Series 2010 Bonds were originally issued in the aggregate principal amount of $8,350,000 and are presently outstanding in the aggregate principal amount of $8,245,000. On December 22, 2014, District No. 3 issued its Series 2014 Bonds in the original aggregate principal amount of $8,715,000 which are outstanding in the aggregate principal amount of $8,715,000. For purposes of providing for the payment of the Series 2010 Bonds and the Series 2014 Bonds, the Districts entered into an Amended and Restated Joint Funding Agreement dated as of September 1, 2010 (the 2010 Funding Agreement ) and the Financing Districts entered into a Joint Funding Agreement dated as of December 22, 2014 (as previously defined, as amended by a First Amendment thereto, the 2014 Funding 5

12 Agreement ), respectively, pursuant to which the Financing Districts are obligated to impose ad valorem property taxes in an amount calculated in the same manner as described above with respect to the District No. 2 Required Mill Levy and District No. 3 Required Mill Levy, and pay the revenues resulting therefrom, plus Specific Ownership Tax, to the Trustee for application in accordance with the 2010 Indenture, the 2014 Indenture and any other document pursuant to which any District issues Parity Bonds. Revenues payable to the Trustee or District No. 1 in accordance with the 2010 Funding Agreement or 2014 Funding Agreement constitute Pledged Revenue under the Indenture, pledged to the Bonds on parity with the Series 2010 Bonds, the Series 2014 Bonds and any additional Parity Bonds. The Surplus Fund also secures the Bonds, the Series 2010 Bonds, the Series 2014 Bonds and any Parity Bonds. Additional Obligations... Purpose of the Bonds... Interest Rates; Payment Provisions; Record Date... Pursuant to the Indenture, District No. 3 is not permitted to issue additional Indebtedness (as defined herein); provided that District No. 3 may issue Additional Bonds (defined herein) secured by Pledged Revenue on parity with the Bonds, the Series 2014 Bonds and Series 2010 Bonds ( Parity Bonds ) without the consent of owners of the Bonds upon the satisfaction of certain tests more particularly described herein. District No. 3 may otherwise issue Additional Bonds secured by Pledged Revenue on a basis subordinate to the Bonds, the Series 2014 Bonds and Series 2010 Bonds ( Subordinate Bonds ) without such consent upon the satisfaction of certain requirements as set forth in the Indenture. See THE BONDS Security for the Bonds and Certain Indenture Provisions Additional Obligations. The Bonds are being issued for the purposes of reimbursing the costs of certain infrastructure within the Financing Districts previously funded by the Developer in accordance with an agreement with District No. 1, as more particularly described in THE DISTRICTS Material Agreements of the Districts Reimbursement and Acquisition Agreement, and for paying costs of issuance of the Bonds. Interest on the Bonds is payable semi annually at the rate set forth on the cover page hereof, on June 1 and December 1 each year, commencing June 1, The principal of and premium, if any, on the Bonds are payable in lawful money of the United States of America to the Owner of each Bond upon maturity or prior redemption and presentation at the principal office of the Trustee. The interest on any Bond is payable to the person in whose name such Bond is registered, at his or her address as it appears on the registration books maintained by or on behalf of the District by the Trustee, at the close of business on the Record Date (meaning the fifteenth (15th) day of the calendar month next preceding each interest payment date), irrespective of any transfer or exchange of such Bond subsequent to such Record Date and prior to such interest payment date; provided that any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the Owner thereof at the close of business on the Record Date and shall be payable 6

13 to the person who is the Owner thereof at the close of business on a Special Record Date for the payment of any such unpaid interest. Such Special Record Date shall be fixed by the Trustee whenever moneys become available for payment of the unpaid interest, and notice of the Special Record Date shall be given to the Owners of the Bonds not less than ten (10) days prior to the Special Record Date by first-class mail to each such Owner as shown on the registration books kept by the Trustee on a date selected by the Trustee. Such notice shall state the date of the Special Record Date and the date fixed for the payment of such unpaid interest. Interest payments shall be paid by check or draft of the Trustee mailed on or before the interest payment date to the Owners. The Trustee may make payments of interest on any Bond by such alternative means as may be mutually agreed to between the Owner of such Bond and the Trustee; provided that the District shall not be required to make funds available to the Trustee prior to the dates on which such interest would otherwise be payable under the Indenture, nor to incur any expenses in connection with such alternative means of payment. To the extent principal of any Bond is not paid when due, such principal shall remain outstanding until paid and shall continue to bear interest at the rate then borne by the Bond. To the extent interest on any Bond is not paid when due, such interest shall compound on each interest payment date, at the rate then borne by the Bond; provided however, that notwithstanding anything herein to the contrary, District No. 3 shall not be obligated to pay more than the amount permitted by law and its electoral authorization in repayment of the Bonds, including all payments of principal, premium if any, and interest, and all Bonds will be deemed defeased and no longer outstanding upon the payment by District No. 3 of such amount. Book-Entry-Only Registration; Owner of Bond... The Indenture defines Owner as the registered owner(s) of any Bond(s) as shown on the registration books maintained by the Trustee. The Bonds will be issued in fully registered form and will be registered initially in the name of Cede & Co. as nominee for The Depository Trust Company, New York, New York ( DTC ), a securities depository. Beneficial ownership interests in the Bonds may be acquired in principal denominations of $5,000 or integral multiples thereof through participants in the DTC system (the Participants ). Such beneficial ownership interests will be recorded in the records of the Participants. Persons for which Participants acquire interests in the Bonds (the Beneficial Owners ) will not receive certificates evidencing their interests in the Bonds so long as DTC or a successor securities depository acts as the securities depository with respect to the Bonds. So long as DTC or its nominee is the registered owner of the Bonds, payments of principal, premium, if any, and interest on the Bonds, as well as notices and other communications made by or on behalf of District No. 3 pursuant to the Bond Resolution, will be made to DTC or 7

14 its nominee only. Disbursement of such payments, notices, and other communications by DTC to Participants, and by Participants to the Beneficial Owners, is the responsibility of DTC and the Participants pursuant to rules and procedures established by such entities. See APPENDIX E Book-Entry-Only System for a discussion of the operating procedures of the DTC system with respect to payments, registration, transfers, notices, and other matters. Exchange and Transfer... While the Bonds remain in book-entry only form, transfer of ownership by Beneficial Owners (as defined by the rules of DTC, defined below) may be made as described under the caption APPENDIX E Book- Entry-Only System. Prior Redemption... The Bonds are subject to optional and mandatory sinking fund redemption as set forth in THE BONDS Prior Redemption. Tax Status... Continuing Disclosure Obligation... Financial Statements... In the opinion of Greenberg Traurig, LLP, Bond Counsel, assuming continuing compliance with certain tax covenants, under existing statutes, regulations, rulings and court decisions, interest on the Bonds is excludable from gross income for federal income tax purposes. Further, interest on the Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations; however, such interest will be taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. See TAX MATTERS herein for a description of the federal alternative minimum tax on corporations and certain other federal tax consequences of ownership of the Bonds. Bond Counsel is further of the opinion that interest on the Bonds is exempt from Colorado income taxes and is not a specific preference item for purposes of the State of Colorado alternative minimum income tax for any period during which interest on the Bonds is not included in gross income for federal income tax purposes. See TAX MATTERS herein. Pursuant to the requirements of the Securities and Exchange Commission Rule 15c2-12 (17 CFR Part 240, c2-12) ( Rule 15c2-12 ), District No. 3 and District No. 2 each has covenanted, for the benefit of the holders of the Bonds, to provide certain financial information and other operating data and notices of material events after the Bonds are issued. The form of each Financing District s Continuing Disclosure Undertaking is attached as APPENDIX B to this Official Statement (the Undertaking ). See also MISCELLANEOUS Undertaking To Provide Ongoing Disclosure. In accordance with Title 29, Article 1, Part 6, Colorado Revised Statutes, as amended ( C.R.S. ), an annual audit is required to be made of the Districts financial statements at the end of the fiscal year unless an exemption from audit has been granted by the State Auditor s Office. The audited financial statements for the Districts for the year ended December 31, 2015 are appended hereto as APPENDIX A. 8

15 Offering and Delivery Information... Debt Ratios... The Bonds are offered when, as, and if issued by District No. 3 and accepted by Underwriter, subject to prior sale and the approving legal opinion of Bond Counsel. It is expected that the Bonds will be available for delivery on or about December 21, 2016, against payment therefor. The following are selected general obligation debt ratios for the Financing Districts collectively (considering the combined assessed valuations of District No. 2 and District No. 3). The obligations of the Financing Districts to provide for the payment of the Bonds, the Series 2014 Bonds and the Series 2010 Bonds constitute limited tax general obligations of the Financing Districts, the principal amount of which, for purposes of the ratios below, is assumed to equal the total principal amount of the Bonds outstanding. Prospective purchasers are cautioned that each Financing District is only required to impose, for the payment of the Bonds, the Series 2014 Bonds and the Series 2010 Bonds, the District No. 2 Required Mill Levy or the District No. 3 Required Mill Levy, as applicable, and in no event is such mill levy to exceed 50 mills, subject to adjustment as described herein. Financing Districts 2016 Combined Assessed Valuation 1... $49,613,643 Financing Districts 2016 Combined Statutory Actual Valuation 1... $556,907,062 Financing Districts General Obligation Debt Outstanding Upon Issuance of the Bonds 1, 2... $29,375,000 Financing Districts Estimated Population ,175 Total Financing Districts Debt as a Ratio of: 2016 Combined Assessed Valuation % 2016 Combined Actual Valuation % Total Financing Districts Debt Per Capita... $13,506 Estimated Overlapping General Obligation Debt 1... $19,868,132 Sum of Financing Districts Debt and Estimated Overlapping Debt 1... $49,243,132 Total Financing Districts Debt and Estimated Overlapping Debt as a Ratio of: 2016 Combined Assessed Valuation % 2016 Combined Actual Valuation % Total Financing Districts Debt and Estimated Overlapping Debt Per Capita... $22,640 1 For definitions of and descriptions of the methodology used in computing assessed valuation, statutory actual value, estimated population, general obligation debt outstanding, and estimated overlapping general obligation debt, see THE BONDS Security for the Bonds, FINANCIAL INFORMATION OF THE DISTRICTS and DEBT STRUCTURE herein. 2 Includes the outstanding principal amount of District No. 1 s Series 2010 Bonds ($8,245,000), the payment obligations with respect to which under the 2010 Funding Agreement constitute limited tax general obligations of the Financing Districts, the principal amount of the Series 2014 Bonds ($8,715,000) the payment obligations with respect to which under the 2014 Funding Agreement constitute limited tax general obligations of the Financing Districts, and the principal amount of the Bonds, which constitute limited tax general obligations of District No. 3 (in accordance with the Indenture) and District No. 2 (in accordance with the 2014 Funding Agreement). 3 Estimated based on the Districts estimate of 870 occupied households in the Financing Districts and 2.5 persons per households. Sources: Jefferson County Assessor s Office, District No. 3 and individual overlapping entities Additional Information... ALL OF THE SUMMARIES OF THE STATUTES, RESOLUTIONS, INDENTURE, OPINIONS, CONTRACTS, AND AGREEMENTS DESCRIBED IN THIS OFFICIAL STATEMENT ARE SUBJECT TO THE ACTUAL PROVISIONS OF SUCH DOCUMENTS. The summaries do not purport to be complete statements of such provisions and reference is made to such documents, copies of which are either 9

16 publicly available or available upon request and the payment of a reasonable copying, mailing, and handling charge from: Fossil Ridge Metropolitan District No. 3, c/o White Bear Ankele Tanaka & Waldron Professional Corporation, 2154 East Commons Avenue, Suite 2000, Centennial, Colorado 80122, Telephone: or D.A. Davidson & Co., 1550 Market Street, Suite 300, Denver, Colorado, 80202, Telephone: (303) FORWARD LOOKING STATEMENTS This Official Statement, and particularly the information contained under the headings entitled INTRODUCTION, RISK FACTORS, and THE DISTRICTS, contain statements relating to future results that are forward looking statements as defined in the Private Securities Litigation Reform Act of When used in this Official Statement, the words estimate, forecast, intend, expect, projected and similar expressions identify forward looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward looking statements. Any projection is subject to such uncertainties. Inevitably, some assumptions used to develop the projections will not be realized and unanticipated events and circumstances will occur. Therefore, it can be expected that there will be differences between projections and actual results, and those differences may be material. For a discussion of certain of such risks and possible variations in results, see RISK FACTORS. RISK FACTORS PROSPECTIVE INVESTORS IN THE BONDS SHOULD READ THIS ENTIRE OFFICIAL STATEMENT AND SHOULD GIVE PARTICULAR CONSIDERATION TO THE FOLLOWING RISK FACTORS IN CONNECTION WITH THE PURCHASE OF THE BONDS. General The purchase of the Bonds involves certain investment risks which are discussed throughout this Official Statement, and each prospective investor should make an independent evaluation of all information presented in this Official Statement in order to make an informed investment decision. The Bonds should only be purchased by investors who can bear the continuing risk of an investment in the Bonds. Particular attention should be given to the factors described below which, among others, could affect the payment of debt service on the Bonds. Limited Obligations; No Conversion to Unlimited Mill Levy Pledge The primary source of revenue pledged for the payment of debt service on the Bonds is expected to be revenue generated from ad valorem taxes assessed against all taxable property of the Financing Districts. District No. 3 has covenanted in the Indenture and District No. 2 has covenanted in the 2014 Funding Agreement to levy an ad valorem property tax mill levy each year upon all taxable property in the Financing Districts in an amount equal to the District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy, respectively, and to transfer the proceeds thereof to the Trustee for application in accordance with the Indenture. In no event is the District No. 2 Required Mill Levy imposed by District No. 2 or the District No. 3 Required Mill Levy imposed by District No. 3 permitted to exceed 50 mills, adjusted as described herein. Bondholders cannot require the Financing Districts to raise the District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy above such maximum amounts for the payment of debt service on the Bonds, whether or not the tax revenues generated from such District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy are sufficient to pay the Bonds. Such mill 10

17 levy limitations are not subject to release upon the achievement of any particular debt to assessed valuation ratio of any of the Financing Districts. See THE BONDS Security for the Bonds and Sources of Payment. District No. 3 s ability to pay principal of and interest on the Bonds when due is dependent upon maintenance of an adequate tax base from which the Financing Districts can realize sufficient property tax revenues from the imposition of the District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy, as applicable. As described herein, in satisfaction of the requirements of the 2010 Indenture and 2014 Indenture applicable to the issuance of the Bonds on a parity with the Series 2010 Bonds and the Series 2014 Bonds, the Districts have calculated that the 2015 certified assessed valuation of the Financing Districts (for collection in 2016) and the 2016 certified assessed valuation of the Financing Districts (for collection in 2017) would produce Pledged Revenue equal to at least 1.25 times the maximum annual debt service on the Bonds, the Series 2014 Bonds and the Series 2010 Bonds, assuming that each Financing District imposes the maximum mill levy of 50 mills. Actual coverage of such projected Pledged Revenue (assuming that each Financing District imposes the maximum mill levy of 50 mills) as compared to the maximum annual debt service on the Bonds, the Series 2014 Bonds and the Series 2010 Bonds is 1.25x based on the 2015 certified assessed valuation of the Financing Districts and approximately 1.31x based on the 2016 certified assessed valuation of the Financing Districts. See THE BONDS Debt Service Coverage. However, no assurance is given that the assessed valuation of the Financing Districts will not decrease. See Risk of Reductions in Assessed Value; Market Value of Land below. The feasibility of payment of the Bonds has been assessed by District No. 3 based solely on the existing aggregate assessed value of the Financing Districts without taking into account future development. This Official Statement does not purport to provide complete information material to the assessment of any future development within the Financing Districts. No assurance is given that any anticipated development described below will occur in the projected timeframe, or at all, or that the prices of homes actually constructed will be at or above the levels projected below. In the event that the revenue derived from the District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy and the other components of the Trust Estate (including amounts on deposit in the Surplus Fund) are insufficient to pay the scheduled principal of and/or interest on the Bonds when due, the unpaid principal will continue to bear interest, and the unpaid interest will compound until the total repayment obligation of District No. 3 for the Bonds equals the amount permitted by law ($4,920,000,000 in total for all debt obligations of District No. 3). During this period of accrual, so long as the Financing Districts are imposing the applicable District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy and District No. 3 is enforcing collection of the Pledged Revenue, District No. 3 will not be in default under the Indenture, and the Owners will have no recourse against District No. 3 to require such payments (other than to require the Financing Districts to continue to assess and enforce the applicable District No. 3 Required Mill Levy and the District No. 2 Required Mill Levy and collect the revenue derived from such levy and the other components of the Pledged Revenue, to the extent permitted under the Service Plan and other applicable law). In addition, in no event may District No. 3 (under the Indenture) or District No. 2 (under the 2014 Funding Agreement) be required to impose a mill levy that would result in the tax revenues resulting therefrom to exceed the maximum amounts permitted under its electoral authority and any other applicable law ($4,920,000,000 annually and $4,920,000,000 in total for each such Financing District). The entire Payment Obligation of District No. 2 under the 2014 Funding Agreement will be deemed defeased and no longer outstanding upon the payment by District No. 2 of the applicable amount. Finally, in accordance with the Service Plan, neither Financing District is permitted to impose a debt service mill levy after January 1, 2057, unless a majority of the Board of Directors of the applicable Financing District imposing the mill levy are residents of such Financing District and have voted in favor of a refunding of the indebtedness which would result in net present value 11

18 savings, as more particularly provided in the Service Plan. See THE BONDS Security for the Bonds Joint Funding Agreements, Required Mill Levies, Certain Indenture Provisions Events of Default and Remedies on Occurrence of Event of Default. No Mortgage Payment of the principal of and interest on the Bonds is not secured by any deed of trust, mortgage or other lien or security interest on any property within any of the Districts. Risk of Reductions in Assessed Value; Market Value of Land The owners of the Bonds are dependent upon the assessed value of property within the Financing Districts to provide a tax base from which ad valorem tax revenues are collected for the payment of debt service on the Bonds. The assessed value of property within the Financing Districts is determined by multiplying the actual value of the property by an assessment rate, and the actual value of the property is determined by the county assessor, all as more particularly described under FINANCIAL INFORMATION OF THE DISTRICTS Ad Valorem Property Taxes. Assessed valuations may be affected by a number of factors beyond the control of the Districts. Property owners are entitled to challenge the valuations of their property each year, and no assurance can be given that owners of property in the Financing Districts will not seek to do so. The values of constructed buildings may be reduced if market prices decline due to economic factors. Should the actions of property owners or market conditions result in lower assessed valuations of property in the Financing Districts, there can be no assurance that property tax revenue from the District No. 2 Required Limited Mill Levy and the District No. 3 Required Mill Levy would be sufficient to pay debt service on the Bonds. In either case, the security for the Bonds would be diminished, increasing the risk of nonpayment. In addition, maintenance of the present assessed valuation of the Financing Districts is based on certain assumptions as to the manner in which various properties will be assessed by the County assessor. While these assumptions are based on information provided by the County assessor, no assurance is given that any particular methodology presently used by the County assessor to determine the actual value of property will continue to be used in the future. Any change in the methodology by which the actual value of property is determined could adversely affect the assessed value of property in the Financing Districts and the property taxes that may be generated thereby. Regardless of the level at which property is assessed for tax purposes, the Districts ability to enforce and collect property taxes is dependent upon the property in the Districts having sufficient fair market value to support the taxes which are imposed. No assurance can be given as to the future market values of property in the Districts. Additional Parity Bonds District No. 3 may issue additional Parity Bonds with the consent of the Owners of the Bonds upon the satisfaction of certain tests more particularly described herein. See THE BONDS Certain Indenture Provisions Additional Obligations. The issuance of additional Parity Bonds would dilute the security for the Bonds. Although, pursuant to the Indenture, issuance of Parity Bonds requires demonstration of certain coverage of projected Pledged Revenue at the maximum mill levy required to be imposed by the Financing Districts, there is no assurance that, subsequent to the issuance of such Parity Bonds, assessed valuation of the Financing Districts would not decrease and that, in such event, the 12

19 resulting revenues available to District No. 3 would be sufficient to pay all of the Bonds, the Series 2014 Bonds, the Series 2010 Bonds and any additional Parity Bonds, if issued. District No. 3 has no present plans for the issuance of additional Parity Bonds, but expects to do so to pay additional reimbursements to the Developer for the costs of public infrastructure, as and to the extent the assessed valuation of the Financing Districts results in satisfaction of the Indenture s coverage test and permits the same. No Acceleration The Indenture provides that notwithstanding anything therein to the contrary, acceleration of the Bonds shall not be an available remedy for an Event of Default. Potential Conflicts of Interest All of the members of the Board of Directors of the Districts are either officers or employees of entities affiliated with the Developer. The issuance of the Bonds and the application of the proceeds therefrom, as well as other activities of the Districts, may involve conflicts of interest. By statute, a director must disqualify himself or herself from voting on any issue in which he or she has a conflict of interest unless he or she has disclosed such conflict of interest in a certificate filed with the Secretary of State and the Board of Directors of the Districts at least 72 hours in advance of any meeting in which such conflict may arise. However, compliance with such statute does not provide absolute certainty that contracts between the Districts and persons related to its directors, such as officers or employees of entities affiliated with the Developer, will not be subject to defenses or challenge on the basis of alleged conflicts. It is expected that the interested members of the Board will comply with the statute by making advance disclosure of their conflicts, and that they will not disqualify themselves from voting. Legal Constraints on District Operations Various State laws and constitutional provisions govern the assessment and collection of ad valorem property taxes and the issuance of bonds; impose limitations on revenues and spending of the State and local governments, including the Districts; and limit rates, fees and charges imposed by such entities. State laws, constitutional provisions and federal laws and regulations apply to the obligations created by the issuance of the Bonds. There can be no assurance that there will not be changes in interpretation of, or additions to, the applicable laws and provisions which would have a material adverse effect, directly or indirectly, on the affairs of the Districts. Risk of Internal Revenue Service Audit The Internal Revenue Service (the Service ) has a program of randomly selecting for audit taxexempt bonds issued by special purpose governmental units, such as the District, for the purpose of determining whether, under applicable tax law, interest on such bonds is excludable from the federal gross income of the owners thereof. The commencement of an audit of the Bonds could adversely affect the market value and liquidity of the Bonds, regardless of the final outcome. An adverse determination by the Service with respect to the tax-exempt status of interest on the Bonds could be expected to adversely impact the secondary market, if any, for the Bonds, and, if a secondary market exists, would also be expected to adversely impact the price at which the Bonds can be sold. The Indenture does not provide for any adjustment to the interest rates borne by the Bonds in the event of a change in the tax-exempt status of the Bonds or for the redemption of the Bonds upon loss of tax-exempt status. Owners of the Bonds should note that, if the Service audits the Bonds, under current audit procedures, the Service will treat the District as the taxpayer during the initial stage of the audit, and the Owners of the Bonds will have limited rights to participate in such procedures. There can be no assurance that the District will have revenues available to contest an adverse determination by the Service. No transaction participant, including none of 13

20 the District, the Underwriters or Bond Counsel, is obligated to pay or reimburse the Owner of any Bond for audit or litigation costs in connection with any legal action, by the Service or otherwise, relating to the Bonds. One question of the Service examines when auditing bonds issued by special districts is whether or not the issuer of such bonds meets the definition of a political subdivision of a state for federal income tax purposes. For example, in a recently concluded examination in the State of Florida involving the Village Center Community Development District (the Village District ), the Service took the position in a private ruling called a technical advice memorandum released in 2013 (the 2013 TAM ), that the Village District was not a division of a state or local government, and therefore, any bonds issued by the Village District could not be tax-exempt. The Service position is based on the fact that the Village District was organized and operated in a manner intended to ensure control of the Village District s board of directors by the private developer of the community served by the Village District, rather than an existing governmental body or an electorate made up of community residents or property owners. In a second technical advice memorandum released in June 2015 (together with the 2013 TAM, the Village TAMs ), the Service determined that the 2013 TAM would not be applied retroactively to the Village District bonds issued prior to the date of the 2013 TAM. In the wake of the Village TAMs, on February 23, 2016, the United States Department of the Treasury released proposed regulations (as corrected on March 9, 2016, the Proposed Regulations ) that provide guidance regarding the definition of political subdivision for purposes of tax-exempt bonds. The proposed regulations require that a political subdivision (i) have the power to exercise at least one sovereign power, (ii) be formed and operated for a governmental purpose, and (iii) have a governing body controlled by or have significant uses of its fund or assets otherwise controlled by a government unit with all three sovereign powers or by an electorate that is not controlled by an unreasonably small number of unrelated electors. Under certain transition rules that apply to obligations issued not later than 90 days after the publication of final regulations in the Federal Register, the proposed definition will not apply to the Bonds for purposes of whether the Bonds are issued by a State or political subdivision. See Changes in Federal and State Tax Law below. Determinations by the Service in private rulings such as the Village TAMs are technically limited to and are binding only on the issuer to whom the ruling is addressed with respect to the Bonds addressed therein. In the case of the Village TAMs, the determinations apply only to the Village District. Nonetheless, the Village TAMs describe a current official position of the Office of Chief Counsel of the Service with respect to districts that are controlled by a private developer and an audit position of the Service under a particular set of facts and circumstances. Bond Counsel to the District has taken the Village TAMs into consideration in reaching a conclusion that interest on the Bonds is excludible from gross income for purposes of federal income taxation; however, the opinions of Bond Counsel are not a guaranty of a particular outcome in the event of an audit of the Bonds, but are an expression of Bond Counsel s legal judgment with respect to the matters addressed therein as of the date the Bonds are issued, and no assurance can be given that the Service will not assert legal positions contrary to those taken by Bond Counsel if an audit of the Bonds is commenced at a later date. See also TAX MATTERS herein. There can be no assurance that an audit by the Service of the Bonds will not be commenced. However, the District has no reason to believe that any such audit will be commenced, or that if commenced, an audit would result in a conclusion of noncompliance with any applicable Service position, regulation or ruling. No rulings have been or will be sought from the Service with respect to any federal tax matters relating to the issuance, purchase, ownership, receipt or accrual of interest upon, or disposition of, the Bonds, including without limitation whether the District is a political subdivision of the State of Colorado for purposes of the Internal Revenue Code and Service regulations. See also TAX MATTERS herein. 14

21 Changes in Federal and State Tax Law From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to under this heading TAX MATTERS or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to obligations issued or executed and delivered prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. For a description of regulations recently proposed by the Service regarding the definition of political subdivisions for purposes of taxexempt bonds, see the section herein entitled RISK FACTORS Risk of Internal Revenue Service Audit. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based on existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation. Enforcement of Property Tax Collection Remedies The duty to pay property taxes does not constitute a personal obligation of the property owners within the Financing Districts. Instead, the obligation to pay property taxes is tied to the properties taxed, and if timely payment is not made, the obligation constitutes a lien against the specific properties. To enforce the liens for delinquent (but not future) property taxes, the County Treasurer has the power to foreclose on and cause the sale of the property that is subject to the delinquent taxes or fees, as provided by law. Foreclosure is generally a time consuming and expensive process and may not necessarily result in recovery of all amounts due. In addition, the Financing Districts ability to enforce and collect property taxes through the foreclosure process is dependent upon the property in the Financing Districts having sufficient fair market value to support the taxes which are imposed. No assurance can be given as to the future market values of property in the Financing Districts. Enforceability of Bondholders Remedies Upon Default The remedies available to the owners of the Bonds upon a default are in many respects dependent upon judicial action, which is often subject to discretion and delay under existing constitutional law, statutory law, and judicial decisions, including specifically the federal bankruptcy code. The legal opinions to be delivered concurrently with delivery of the Bonds will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, and insolvency or other similar laws affecting the rights of creditors generally, now or hereafter in effect; to usual equity principles which may limit the specific enforcement under State law of certain remedies; to the exercise by the United States of America of the powers delegated to it by the federal constitution; and to the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies, in the interest of serving an important public purpose. 15

22 THE BONDS Description The Bonds are limited tax and special revenue obligations of District No. 3 issued in the total principal amounts, dated the dates, maturing on the dates and bearing interest at the rates set forth on the cover page of under the caption INTRODUCTION of this Official Statement. For a complete statement of the details and conditions of the Bonds, reference is made to the Indenture and the 2014 Funding Agreement, copies of which are available as described in INTRODUCTION Additional Information. Sources of Payment The Bonds are limited tax and special limited revenue obligations of District No. 3 secured by and payable from the Trust Estate (as defined herein), including the Pledged Revenue comprised of all revenues derived from Property Taxes and Specific Ownership Taxes, as more particularly described herein. The Bonds are secured by such Pledged Revenue on parity with District No. 1 s Series 2010 Bonds, presently outstanding in the aggregate principal amount of $8,245,000 and District No. 3 s Series 2014 Bonds currently outstanding in the aggregate principal amount of $8,715,000. The Bonds are also secured by amounts, if any, accumulated in a Surplus Fund. See Security for the Bonds below. THE BONDS ARE SOLELY THE OBLIGATIONS OF DISTRICT NO. 3 AND, PURSUANT TO AND SOLELY TO THE EXTENT OF ITS OBLIGATIONS UNDER THE 2014 FUNDING AGREEMENT, DISTRICT NO. 2. UNDER NO CIRCUMSTANCES SHALL ANY OF THE BONDS BE CONSIDERED OR HELD TO BE AN INDEBTEDNESS, OBLIGATION OR LIABILITY OF THE CITY OF LAKEWOOD, JEFFERSON COUNTY, THE STATE OF COLORADO OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE FINANCING DISTRICTS. Authorized Denominations of the Bonds The Bonds are transferable in Authorized Denominations, defined in the Indenture to mean $5,000 and any integral multiple thereof. Interest Rates; Payment Provisions Interest on the Bonds is payable semi annually at the rate set forth on the cover page hereof, on June 1 and December 1 each year, commencing June 1, The principal of and premium, if any, on the Bonds are payable in lawful money of the United States of America to the Owner of each Bond upon maturity or prior redemption and presentation at the principal office of the Trustee. The interest on any Bond is payable to the person in whose name such Bond is registered, at his or her address as it appears on the registration books maintained by or on behalf of the District by the Trustee, at the close of business on the Record Date, irrespective of any transfer or exchange of such Bond subsequent to such Record Date and prior to such interest payment date; provided that any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the Owner thereof at the close of business on the Record Date and shall be payable to the person who is the Owner thereof at the close of business on a Special Record Date for the payment of any such unpaid interest. Such Special Record Date shall be fixed by the Trustee whenever moneys become available for payment of the unpaid interest, and notice of the Special Record Date shall be given to the Owners of the Bonds not less than ten (10) days prior to the Special Record Date by first-class mail to each such Owner as shown on the registration books kept by 16

23 the Trustee on a date selected by the Trustee. Such notice shall state the date of the Special Record Date and the date fixed for the payment of such unpaid interest. Interest payments shall be paid by check or draft of the Trustee mailed on or before the interest payment date to the Owners. The Trustee may make payments of interest on any Bond by such alternative means as may be mutually agreed to between the Owner of such Bond and the Trustee; provided that the District shall not be required to make funds available to the Trustee prior to the dates on which such interest would otherwise be payable under the Indenture, nor to incur any expenses in connection with such alternative means of payment. To the extent principal of any Bond is not paid when due, such principal shall remain outstanding until paid and shall continue to bear interest at the rate then borne by the Bond. To the extent interest on any Bond is not paid when due, such interest shall compound on each interest payment date, at the rate then borne by the Bond; provided however, that notwithstanding anything herein to the contrary, District No. 3 shall not be obligated to pay more than the amount permitted by law and its electoral authorization in repayment of the Bonds, including all payments of principal, premium if any, and interest, and all Bonds will be deemed defeased and no longer outstanding upon the payment by District No. 3 of such amount. Prior Redemption Optional Redemption. Bonds maturing on and after December 1, 2021, are subject to redemption prior to maturity, at the option of District No. 3, as a whole or in integral multiples of $5,000, in any order of maturity and in whole or partial maturities, on December 1, 2020, and on any date thereafter, upon payment of par and accrued interest, without redemption premium. Mandatory Sinking Fund Redemption. The Bonds maturing on December 1, 2026 also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds, in part, by lot, upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: Year of Redemption Principal Amount on Redemption Date 2021 $ 180, , , , , ,000 1 Maturity date, not a sinking fund redemption. The Bonds maturing on December 1, 2036 also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds, in part, by lot, upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: 17

24 Year of Redemption Principal Amount on Redemption Date 2027 $240, , , , , , , , , ,000 1 Maturity date, not a sinking fund redemption. The Bonds maturing on December 1, 2046 also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds, in part, by lot, upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: Year of Redemption Principal Amount 2037 $ 395, , , , , , , , ,810, ,905,000 1 Maturity date, not a sinking fund redemption. With respect to each maturity of the Bonds subject to mandatory sinking fund redemption, on or before forty-five (45) days prior to each sinking fund installment date for such maturity as set forth above, the Trustee shall select for redemption, by lot in such manner as the Trustee may determine, from the Outstanding Bonds of that maturity, a principal amount of such Bonds equal to the applicable sinking fund installment. The amount of the applicable sinking fund installment for any particular date and maturity may be reduced by the principal amount of any Bonds of that maturity which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and cancelled and not theretofore applied as a credit against a sinking fund installment. Such reductions, if any, shall be applied in such year or years as may be determined by District No. 3. General Redemption Provisions. If less than all of the Bonds within a maturity are to be redeemed on any prior redemption date, the Bonds to be redeemed shall be selected by lot prior to the date fixed for redemption, in such manner as the Trustee shall determine. The Bonds shall be redeemed only in integral multiples of $5,000. In the event a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in the principal amount of $5,000 or any integral multiple thereof. Such Bond shall be treated for the purpose of redemption as that number of Bonds which results from dividing the principal amount of such Bond by $5,000. In the event a portion of any 18

25 Bond is redeemed, the Trustee shall, without charge to the Owner of such Bond, authenticate and deliver a replacement Bond or Bonds for the unredeemed portion thereof. Notice and Effect of Redemption. In the event any of the Bonds or portions thereof are called for redemption as aforesaid, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee by mailing a copy of the redemption notice by first class mail (postage prepaid), not less than thirty (30) days prior to the date fixed for redemption, to the Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books maintained by or on behalf of District No. 3 by the Trustee. Failure to give such notice by mailing to any Owner, or any defect therein, shall not affect the validity of any proceeding for the redemption of other Bonds as to which no such failure or defect exists. The redemption of the Bonds may be contingent or subject to such conditions as may be specified in the notice, and if funds for the redemption are not irrevocably deposited with the Trustee or otherwise placed in escrow and in trust prior to the giving of notice of redemption, the notice shall be specifically subject to the deposit of funds by District No. 3. All Bonds so called for redemption will cease to bear interest after the specified redemption date, provided funds for their redemption are on deposit at the place of payment at that time. Application of Bond Proceeds General. Proceeds from the sale of the Bonds are being issued for the purposes of reimbursing the costs of certain infrastructure within the Financing Districts previously funded by the Developer in accordance with an agreement with District No. 1, as more particularly described in THE DISTRICTS Material Agreements of the Districts Reimbursement and Acquisition Agreement, and for paying costs of issuance of the Bonds. Sources and Uses of Funds. The estimated uses of the proceeds of the Bonds and funds available from other sources are as follows: SOURCES: Par amount of the Bonds... $12,415, Original Issue Premium , Total... $12,810, USES: Deposit to Project Fund... $12,591, Costs of issuance, including underwriting discount, 1 professional fees, printing costs, rating and contingency , Total... $12,810, See MISCELLANEOUS Underwriting. Source: The Underwriter Security for the Bonds Special, Limited Obligations; Pledged Revenue. The Bonds are limited tax and special limited revenue obligations of District No. 3 secured by and payable from the Trust Estate (defined below), including the Pledged Revenue, defined as all revenues derived from Property Taxes and Specific Ownership Taxes. The Bonds are secured by such Pledged Revenue on parity with District No. 1 s Series 2010 Bonds, presently outstanding in the aggregate principal amount of $8,245,000 and the District s Series 2014 Bonds, presently outstanding in the aggregate principal amount of $8,715,

26 The Bonds, the Series 2014 Bonds and the Series 2010 Bonds are also secured by amounts accumulated, if any, on deposit in a Surplus Fund. See Certain Indenture Provisions Surplus Fund below. Property Taxes means (i) the District No. 3 Required Mill Levy levied by District No. 3 (pursuant to the Indenture); (ii) the District No. 2 Required Mill Levy levied by District No. 2 and required to be remitted to District No. 3 or the Trustee pursuant to the 2014 Funding Agreement; and (iii) the ad valorem property taxes levied and collected or received by District No. 2 and District No. 3 pursuant to its mill levy and required to be remitted to District No. 1 or the Trustee pursuant to the 2010 Funding Agreement. Specific Ownership Tax means (i) the specific ownership taxes collected by the county and remitted to District No. 3 pursuant to , C.R.S., or any successor statute; (ii) the specific ownership taxes collected by the county and remitted to District No. 2 pursuant to , C.R.S., or any successor statute and required to be remitted to District No. 3 or the Trustee pursuant to the 2014 Funding Agreement and (iii) the specific ownership taxes collected by the county and remitted to District No. 2 and District No. 3 pursuant to , C.R.S., or any successor statute and required to be remitted to District No. 1 or the Trustee pursuant to the 2010 Funding Agreement. Trust Estate means: (i) all the Pledged Revenue; (ii) all of the Trustee s right, title and interest in and to and remedies under the Bond Documents (generally meaning the Bonds, the Indenture, the 2014 Funding Agreement, and any supplements thereto); (iii) all moneys which are at any time or from time to time on deposit in the Bond Fund, the Costs of Issuance Fund and the Surplus Fund; and (iv) all other legally available revenues of the Districts and all right, title and interest in and to and remedies with respect to any and all other property, if any, of every description and nature from time to time hereafter by delivery or by writing of any kind conveyed, pledged, assigned or transferred, as and for additional security hereunder, by the Districts or by anyone on its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the Indenture. In accordance with the Indenture, the 2010 Indenture, the 2010 Funding Agreement, the 2014 Indenture and the 2014 Funding Agreement, all Pledged Revenue is to be deposited with the Trustee and applied in accordance with the Indenture, the 2014 Indenture and the 2010 Indenture, as more particularly described in THE BONDS Certain Indenture Provisions Flow of Funds. See also THE BONDS Security for the Bonds and FINANCIAL INFORMATION OF THE DISTRICTS. THE BONDS ARE SOLELY THE OBLIGATIONS OF DISTRICT NO. 3 AND, PURSUANT TO AND SOLELY TO THE EXTENT OF ITS OBLIGATIONS UNDER THE 2014 FUNDING AGREEMENT, DISTRICT NO. 2. UNDER NO CIRCUMSTANCES SHALL ANY OF THE BONDS BE CONSIDERED OR HELD TO BE AN INDEBTEDNESS, OBLIGATION OR LIABILITY OF THE CITY OF LAKEWOOD, JEFFERSON COUNTY, THE STATE OF COLORADO OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE FINANCING DISTRICTS. Joint Funding Agreements. In connection with the issuance of the Series 2014 Bonds, the Financing Districts entered into a Joint Funding Agreement dated December 22, 2014 (as previously defined, as amended by a First Amendment thereto, the 2014 Funding Agreement ), pursuant to which District No. 2 is obligated to impose the District No. 2 Required Mill Levy for the purpose of providing for the payment of the Series 2014 Bonds and other Parity Debt, as defined therein (including the Series 2010 Bonds and the Bonds). In addition, in connection with District No. 1 s issuance of the Series 2010 Bonds, the Districts have previously entered into an Amended and Restated Joint Funding Agreement dated as of September 1, 2010 (the 2010 Funding Agreement and, together with the 2014 Funding 20

27 Agreement, the Funding Agreements ), pursuant to which both District No. 2 and District No. 3 are obligated to impose ad valorem property taxes for the purpose of providing for the payment of the Series 2010 Bonds and other Parity Debt, as defined therein (including the Series 2014 Bonds and the Bonds). See Required Mill Levies below. The ad valorem property tax pledge of District No. 2 and District No. 3 under the 2010 Funding Agreement is the same pledge as District No. 2 s and District No. 3 s pledge to impose the District No. 2 Required Mill Levy and the District No. 3 Required Mill Levy under the 2014 Funding Agreement, the 2014 Indenture and the Indenture, respectively. All revenues payable to the Trustee under the Funding Agreements constitute Pledged Revenue pledged to the payment of the Bonds, the Series 2014 Bonds and the Series 2010 Bonds on parity, in accordance with the Indenture, the 2014 Indenture and the 2010 Indenture. Pursuant to the 2014 Funding Agreement, in exchange for the issuance of the obligations secured thereby, the proceeds of which are to be applied to pay the costs of acquiring, constructing, and installing a portion of the facilities the debt for which was approved by the 2006 Election, District No. 2 agrees to pay such portion of the principal of, and interest on, the Series 2014 Bonds, any outstanding Parity Debt (including the Bonds and the Series 2010 Bonds), replenishment of any reserve fund with respect to any outstanding Parity Debt (the Financing Costs ) as may be funded with the Pledged Revenue available to it from imposition of the District No. 2 Required Mill Levy. The obligation of District No. 2 to pay its portion of the Financing Costs as provided in the 2014 Funding Agreement constitutes a limited tax obligation of District No. 2 payable solely from and to the extent of the Pledged Revenue. The obligation of District No. 2 to pay the Financing Costs as provided in the 2014 Funding Agreement constitutes an irrevocable lien upon the Pledged Revenue of District No. 2, on parity with the lien thereon of the 2010 Funding Agreement, and the Pledged Revenue is pledged by District No. 2 for the benefit of District No. 3 and the Trustee for the payment of Financing Costs in accordance with the provisions of the 2014 Funding Agreement, the 2014 Indenture and the Indenture. For purposes of the 2014 Funding Agreement, Pledged Revenue means District No. 2 Taxes (meaning revenues resulting from the District No. 2 Required Mill Levy and the revenues derived by District No. 2 from the Specific Ownership Tax), and any other legally available moneys which District No. 2 determines in its sole discretion, to make available for payment of Financing Costs. Pursuant to the 2014 Funding Agreement, District No. 2 agrees not to incur, assume or issue any debt without District No. 3 s prior written consent Funding Agreement Events of Default and Remedies. The occurrence or existence of any one or more of the following events shall be an Event of Default under the 2014 Funding Agreement, and there shall be no default or Event of Default under the 2014 Funding Agreement except as provided below: (a) District No. 2 fails or refuses to impose the District No. 2 Required Mill Levy or to remit the Pledged Revenue as required by the terms of the 2014 Funding Agreement; (b) any representation or warranty made by any party in the 2014 Funding Agreement proves to have been untrue or incomplete in any material respect when made and which untruth or incompletion would have a material adverse effect upon any other party; (c) any party fails in the performance of any other of its covenants in the 2014 Funding Agreement, and such failure continues for forty-five (45) days after written notice specifying such default and requiring the same to be remedied is given to any of the parties hereto; or (d) any party shall commence any case, proceeding, or other action (A) under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization, or relief of debtors, seeking to have an order for relief entered with respect to it or seeking to adjudicate it insolvent or a bankrupt or seeking reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition, or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, or other similar official for itself or for any substantial part of its property, or any party shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any party any case, proceeding, or other action of a nature referred to in clause (i) and the same shall remain not dismissed within sixty (60) 21

28 days following the date of filing; or (iii) there shall be commenced against any party any case, proceeding, or other action seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or any substantial part of its property which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed, or bonded pending appeal within sixty (60) days from the entry thereof, or (iv) any party shall take action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) any party shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due. Upon the occurrence and continuance of an Event of Default, any party may proceed to protect and enforce its rights against the party or parties causing the Event of Default by mandamus or such other suit, action, or special proceedings in equity or at law, in any court of competent jurisdiction, including an action for specific performance. In the event of any litigation or other proceeding to enforce any of the terms, covenants or conditions hereof, the prevailing party in such litigation or other proceeding shall obtain, as part of its judgment or award, its reasonable attorneys fees and costs. Required Mill Levies. Pursuant to the Indenture, the 2014 Indenture and the 2010 Funding Agreement, District No. 3 is required to impose the Required Mill Levy (referred to herein as the District No. 3 Required Mill Levy ), and pursuant to the 2014 Funding Agreement, District No. 2 is required to impose the District No. 2 Required Mill Levy, meaning: (a) an ad valorem mill levy (a mill being equal to 1/10 of one cent) levied upon all taxable property of the applicable District each year in an amount sufficient to fund the Estimated Debt Requirements for the year in which the taxes derived from such levy are collected and pay the Annual Financing Costs for such year; provided, however, that such mill levy shall under no circumstances be less than 30 mills, nor greater than the Maximum Mill Levy, and (b) Notwithstanding anything herein to the contrary, in no event may the District No. 2 Required Mill Levy or the District No. 3 Required Mill Levy be established at a mill levy which would cause the District No. 2 or District No. 3, respectively, to derive tax revenue in any year in excess of the maximum tax increases permitted by the applicable District s electoral authorization, and if the District No. 2 Required Mill Levy or the District No. 3 Required Mill Levy as calculated pursuant to the provisions of the foregoing paragraphs (a) and (b) would cause the amount of taxes collected in any year to exceed the maximum tax increase permitted by District No. 2 s or District No. 3 s (as applicable) electoral authorization, the District No. 2 Required Mill Levy or the District No. 3 Required Mill Levy, as applicable, shall be reduced to the point that such maximum tax increase is not exceeded. Annual Financing Costs means the Financing Costs to become due and payable in accordance with the Indenture, the 2014 Indenture and the 2010 Indenture in the next succeeding fiscal year. Estimated Debt Requirements means the estimated amount of principal and interest due and owing on the Bonds, as well as all Parity Debt. Financing Costs means the principal of, and interest on, the Bonds, any outstanding Parity Bonds, and replenishment of any reserve fund with respect to any outstanding Parity Bonds, taking into account the limitations imposed by the Maximum Net Effective Interest Rate, the Maximum Mill Levy and the Maximum Debt Mill Levy Imposition Term. General Obligation Debt means general obligation bonds or other financial obligations issued by any District, which are not subject to annual appropriation, the payment of which any District has promised to impose, collect and pledge an ad valorem property tax mill levy, as permitted by the Service Plan. 22

29 Maximum Debt Mill Levy Imposition Term means all Debt (as defined in the Service Plan) issued shall be issued with a term not to exceed thirty (30) years; provided that the Maximum Debt Mill Levy Imposition Term may be extended pursuant to an intergovernmental agreement between the City and the District. Maximum Mill Levy means the maximum mill levy that the Financing Districts are permitted to impose for all purposes, including payment of General Obligation Debt and operations and maintenance costs, and may not exceed fifty (50) mills; provided that if, on or after January 1, 2007, there are changes in the method of calculating assessed valuation or any constitutionally mandated tax credit, cut or abatement, the mill levy limitation applicable to such Debt may be increased or decreased to reflect such changes, such increases or decreases to be determined by the Board in good faith (such determination to be binding and final) so that to the extent possible, the actual tax revenues generated by the mill levy, as adjusted for changes occurring after January 1, 2007, are neither diminished nor enhanced as a result of such changes. For purposes of the foregoing, a change in the ratio of actual valuation shall be deemed to be a change in the method of calculating assessed valuation. Any increase to the Maximum Mill Levy over those adjustments permitted herein shall constitute a material modification to the Service Plan. Maximum Net Effective Interest Rate means a rate not to exceed 4% above the 30 year AAA GO rate provided by the Municipal Market Advisors, which rate was 7.16% as of the date of pricing of the Bonds. In no event is the District No. 2 Required Mill Levy imposed by District No. 2 or the District No. 3 Required Mill Levy imposed by District No. 3 permitted to exceed 50 mills, adjusted as described herein. In accordance with the Service Plan, neither Financing District is permitted to impose a debt service mill levy after January 1, 2057, unless a majority of the Board of Directors of the applicable Financing District imposing the mill levy are residents of such Financing District and have voted in favor of a refunding of the indebtedness which will result in net present value savings, as more particularly provided in the Service Plan. The Indenture provides that, for the purpose of paying the principal of, premium if any, and interest on the Bond, and any Parity Bonds, and, if necessary, funding the Surplus Fund, District No. 3 covenants to cause to be levied on all of the taxable property of District No. 3, in addition to all other taxes, direct annual taxes in each of the years 2017 to 2046, inclusive (and, to the extent necessary to make up any overdue payments on the Bonds, in each year from 2047 to 2056, inclusive, or such later date as may be permitted by the Service Plan), in the amount of the District No. 3 Required Mill Levy. Nothing in the Indenture shall be construed to require District No. 3 to levy an ad valorem property tax in excess of the District No. 3 Required Mill Levy. Pursuant to the 2014 Funding Agreement, District No. 2 agrees to levy on all of the taxable property of District No. 2, in addition to all other taxes, direct annual taxes in each of the 2016 to 2044, inclusive (and, to the extent necessary to make up any overdue payments on the Bonds, in each year from 2045 to 2056, inclusive, or such later date as may be permitted by the Service Plan), in the amount of the District No. 2 Required Mill Levy. Nothing shall be construed to require District No. 2 to impose an ad valorem property tax levy in excess of the District No. 2 Required Mill Levy. The Indenture and the 2014 Funding Agreement each state that it is the intent of each of the Financing Districts that the amount of the District No. 2 Required Mill Levy each year shall be the same as the amount of the District No. 3 Required Mill Levy. However, pursuant to the Indenture, if District No. 2 is imposing its Maximum Mill Levy and such imposition is not adequate to pay its share of the 23

30 Financing Costs, or if District No. 2 fails to impose the District No. 2 Required Mill Levy, then District No. 3 is required to impose such mill levy as is necessary to provide District No. 3 Taxes to pay the Annual Financing Costs, when combined with the revenue derived by the imposition of the District No. 2 Required Mill Levy by District No. 2 pursuant to the 2014 Funding Agreement and the other revenue pledged under the Indenture, up to but not exceeding its Maximum Mill Levy. Furthermore, pursuant to the 2014 Funding Agreement, if District No. 3 is imposing its Maximum Mill Levy and such imposition is not adequate to pay its share of the Financing Costs, or if District No. 3 fails to impose the District No. 3 Required Mill Levy, then District No. 2 is required to impose such mill levy as is necessary to provide District No. 2 Taxes to pay the Annual Financing Costs, when combined with the revenue derived by the imposition of the District No. 3 Required Mill Levy by District No. 3 pursuant to the Indenture and the other revenue pledged under the Indenture, up to but not exceeding its Maximum Mill Levy. For purposes of the foregoing, District No. 2 Taxes means revenues resulting from the District No. 2 Required Mill Levy and District No. 3 Taxes means revenues resulting from the District No. 3 Required Mill Levy. Specific Ownership Tax Revenues. Specific Ownership Tax Revenues is defined in the Indenture to mean the specific ownership tax imposed by the State, collected by the County and remitted to District No. 3 pursuant to , C.R.S., or any successor statute; (ii) the specific ownership taxes collected by the County and remitted to District No. 2 pursuant to , C.R.S., or any successor statute and required to be remitted to District No. 3 or the Trustee pursuant to the 2014 Funding Agreement and (iii) the specific ownership taxes collected by the County and remitted to District No. 2 and District No. 3 pursuant to , C.R.S., or any successor statute and required to be remitted to District No. 1 or the Trustee pursuant to the 2010 Funding Agreement. Outstanding Parity Bonds The Bonds are secured by a first lien (but not an exclusive first lien) on the Pledged Revenue. Pursuant to an Indenture of Trust dated as of September 1, 2010 (as amended and supplemented by a First Amendment thereto dated as of December 1, 2014, the 2010 Indenture ) between District No. 1 and the Trustee, District No. 1 has previously issued its Tax Supported Revenue Refunding Bonds, Series 2010 (the Series 2010 Bonds ). The Series 2010 Bonds were originally issued in the aggregate principal amount of $8,350,000 and are presently outstanding in the aggregate principal amount of $8,245,000. On December 22, 2014, District No. 3 issued its Series 2014 Bonds in the original aggregate principal amount of $8,715,000 which are outstanding in the aggregate principal amount of $8,715,000. The Series 2010 Bonds and Series 2014 Bonds constitute Parity Bonds under the Indenture. See Certain Indenture Provisions Flow of Funds below. Certain Indenture Provisions The following is a description of certain provisions of the Indenture and is subject in all respects to the more specific provisions of the Indenture. Creation and Continuation of Funds and Accounts. Under the Indenture there are created and established (or continued, as indicated below) the following funds and accounts, which are to be established with and maintained by the Trustee pursuant to the provisions of the Indenture: (a) (b) (c) the Project Fund; the Costs of Issuance Fund; the Bond Fund; and 24

31 (d) the Surplus Fund (established by the 2010 Indenture and continued by the Series 2014 Indenture and the Indenture). Flow of Funds. The Indenture requires District No. 3 to transfer all amounts comprising Pledged Revenue to the Trustee as soon as may be practicable after the receipt thereof. The Trustee shall apply the Pledged Revenue in the following order of priority. For purposes of the following: (i) when credits to more than one fund, account, or purpose are required at any single priority level, such credits shall rank pari passu with each other, and (ii) when credits are required to go to funds or accounts which are not held by the Trustee under the Indenture (including, without limitation, funds or accounts held under the 2010 Indenture and 2014 Indenture), the Trustee may rely upon the written instructions of District No. 3 with respect to the appropriate funds or accounts to which such credits are to be made. FIRST: To the credit of the Bond Fund, the amounts described in Bond Fund below, and to the credit of any other similar fund or account established for the payment of the principal of, premium if any, and interest on any Parity Bonds, the amounts required by the resolution or other enactment authorizing issuance of the Parity Bonds; SECOND: To the credit of any reserve fund or account established to secure payment of the principal of, premium if any, and interest on any Parity Bonds, the amounts required by the resolution or other enactment authorizing issuance of the Parity Bonds; THIRD: For so long as the Surplus Fund has not been terminated, to the credit of the Surplus Fund the amounts described in Surplus Fund below, and to the credit of any other similar fund or account established to secure payment of the principal of, premium if any, and interest on any Parity Bonds, the amounts required by the resolution or other enactment authorizing issuance of the Parity Bonds; FOURTH: To the credit of any other fund or account hereafter established for the payment of the principal of, premium if any, and interest on Subordinate Bonds, including any sinking fund, reserve fund, or similar fund or account established therefor, the amounts required by the resolution or other enactment authorizing issuance of the Subordinate Bonds; and FIFTH: To the credit of any other fund or account as may be designated by District No. 3, to be used for any lawful purpose, any Pledged Revenue remaining after the payments and accumulations set forth above. Any reserve funds established to secure the payment of Parity Bonds as referenced above secure only such Parity Bonds and not the Bonds (i.e., the Series 2014 Bonds). The Surplus Fund established by the 2010 Indenture secures the Bonds, the Series 2014 Bonds, the Series 2010 Bonds, and any other Parity Bonds. Bond Fund. Subject to the receipt of sufficient Pledged Revenue, there shall be credited to the Bond Fund each Bond Year an amount of Pledged Revenue which, when combined with other legally available moneys in the Bond Fund (not including moneys deposited thereto from other funds pursuant to the terms of the Indenture), will be sufficient to pay the principal of, premium if any, and interest on the Bonds which has or will become due in the Bond Year in which the credit is made. Moneys in the Bond Fund (including any moneys transferred thereto from other funds pursuant to the terms hereof) shall be used by the Trustee solely to pay the principal of, premium if any, and interest on the Bonds, in the following order: 25

32 FIRST, to the payment of interest due in connection with the Bonds (including without limitation current interest, accrued but unpaid interest, and interest due as a result of compounding, if any); and SECOND, to the extent any moneys are remaining in the Bond Fund after the payment of such interest, to the payment of the principal of and premium, if any, on the Bonds, whether due at maturity or upon prior redemption. In the event that available moneys in the Bond Fund (including any moneys transferred thereto from other funds pursuant to the terms hereof) are insufficient for the payment of the principal of, premium if any, and interest due on the Bonds on any due date, the Trustee shall apply such amounts on such due date as follows: FIRST, the Trustee shall pay such amounts as are available, proportionally in accordance with the amount of interest due on each Bond; and SECOND, the Trustee shall apply any remaining amounts to the payment of the principal of and premium, if any, on as many Bonds as can be paid with such remaining amounts, such payments to be in increments of $1,000 or any integral multiple thereof, plus any premium. Bonds or portions thereof to be redeemed pursuant to such partial payment shall be selected by lot from the Bonds the principal of which is due and owing on the due date. Cost of Issuance Fund. Pursuant to the Indenture, amounts credited to the Costs of Issuance Fund shall be used by the Trustee to pay the costs of issuance of the Bonds. The Trustee is hereby directed to pay the costs of issuance to the parties and in the amounts listed in a closing memorandum provided to the Trustee by the Underwriter and acknowledged by District No. 3 s President or the District No. 3 s Representative (as defined in the Indenture), upon presentation of an invoice from each party for the amount listed. Any discrepancies will be approved by District No. 3 prior to payment of the expense. Moneys held as part of the Costs of Issuance Fund may be invested or reinvested by the Trustee in Permitted Investments in accordance with written instructions from District No. 3. Any moneys remaining in the Costs of Issuance Fund ninety (90) days after the date of issuance of the Bonds shall be credited to the Bond Fund. Project Fund In General. Pursuant to the Indenture, so long as no Event of Default shall have occurred and be continuing, the Trustee will disburse funds from the Project Fund in accordance with requisitions in substantially the form set forth in the Indenture, signed by the District Representative or the President or Vice President of District No. 3. In addition, in the event the moneys in the other funds and accounts held by the Trustee hereunder and legally available for payment of the Bonds are ever insufficient to pay the principal of, premium if any, or interest on the Bonds when due and there is no Event of Default, the Trustee shall transfer moneys from the Project Fund to the Bond Fund in amounts sufficient, when combined with such other legally available moneys, to make such payments when due; and in the event all of such moneys are still insufficient to make such payments when due, the Trustee shall nonetheless transfer all moneys in the Project Fund to the Bond Fund. Upon the receipt by the Trustee of a resolution of District No. 3 determining that all Project Costs have been paid, any balance remaining in the Project Fund shall be credited to the Bond Fund. In addition, upon District No. 3 s determination that the funds in the Project Fund exceed the amount necessary to pay all Project Costs, such excess amount shall be credited to the Bond Fund in the amounts 26

33 determined by District No. 3. The Project Fund shall terminate at such time as no further moneys remain therein. Upon the occurrence and continuance of an Event of Default, the Trustee will cease disbursing moneys from the Project Fund, but instead shall apply such moneys in the manner provided in the Indenture. Surplus Fund. Pursuant to the Indenture, there shall be deposited in the Surplus Fund, Pledged Revenue which is not used for payment of interest on the Bonds and any Parity Bonds, all as required in the Indenture, or which are not deposited in the reserve fund for the 2010 Bonds, in each Bond Year up to the combined amount of the 2010 Maximum Surplus Amount ($820,000), the 2014 Maximum Surplus Amount ($871,500) and the 2016 Maximum Surplus Amount ($1,241,500). The Surplus Fund has a current balance of approximately $732,601; provided, however, that following payments on the Series 2010 Bonds and the Series 2014 Bonds on December 1, 2016, and application of the remaining excess Pledged Revenue in accordance with the 2010 Indenture and 2014 Indenture, the District projects there will remain approximately $1,250,250 on deposit in the Surplus Fund. The Surplus Fund shall not be funded with Bond proceeds, but shall be funded solely from deposits of Pledged Revenue, and except to the extent Pledged Revenue is available under such section, District No. 3 has no obligation to fund the Surplus Fund in any amount. If on any stated maturity date, redemption date, or Interest Payment Date, the Bond Fund and any other similar funds in connection with any Parity Bonds, do not contain sufficient moneys to pay the principal of and interest on the Bonds and any Parity Bonds due and payable on such maturity date, redemption date, or Interest Payment Date, the Trustee is to transfer moneys from the Surplus Fund to the Bond Fund and any other similar funds in connection with any Parity Bonds to the extent of such deficiency. District No. 3 shall maintain the combined amount of the 2016 Maximum Surplus Amount, 2014 Maximum Surplus Amount and 2010 Maximum Surplus Amount until such time as the Pledged Revenue for the prior two Fiscal Years of District No. 3 is equal to or greater than 1.35x the Maximum Annual Debt Service (as defined in Additional Obligations below) on the Bonds and any Parity Bonds. Upon such event, the moneys in the Surplus Fund are to be credited pursuant to FIFTH in Flow of Funds above if there are any Outstanding Subordinate Bonds, and if there are no Outstanding Subordinate Bonds, then such amounts remaining in the Surplus Fund are to be transferred to District No. 3 and used by it, first to pay amounts due and owing to District No. 1 under the Master IGA for reimbursement to the Developer under the Reimbursement and Acquisition Agreement, and if no amounts are due and owing under the Master IGA and the Reimbursement and Acquisition Agreement, then second to District No. 3 to be used by it for any lawful purpose, and the Surplus Fund is to be terminated. Additional Obligations. District No. 3 may issue Additional Bonds (meaning bonds, notes, evidences of indebtedness or other multiple fiscal year financial obligations of the Districts) constituting Parity Bonds (meaning such Additional Bonds secured by the Pledged Revenue on a parity with the Bonds) and Subordinate Bonds (meaning such Additional Bonds secured by the Pledged Revenue on a subordinate lien status relative to the Bonds) as described below, and otherwise may not incur any other Indebtedness. The aggregate principal amount of Additional Bonds which may be issued hereunder shall not exceed the limitations set forth in the Service Plan. The Indenture defines Indebtedness as any (i) indebtedness of District No. 3 for borrowed moneys, (ii) any leases required to be capitalized in accordance with generally accepted accounting principles and (iii) installment purchase obligations. Indebtedness does not include accounts payable or other obligations of District No. 3 incurred in the ordinary course of business, which obligations are not required to be capitalized in accordance with generally accepted accounting principles. As long as no event of non-performance under the Indenture has occurred and is continuing, a series of Additional Bonds (meaning bonds, notes, evidences of indebtedness or other multiple fiscal year 27

34 financial obligations of the Districts) constituting Parity Bonds (meaning such obligations secured by the Pledged Revenue on a parity with the Bonds) may be issued thereunder, for the purpose of financing the acquisition of or Construction of the Facilities (as defined in the Indenture) to the extent permitted by law including the costs of issuance and sale of such Additional Bonds and interest during Construction (as defined in the Indenture) for such period as shall be determined by District No. 3, subject to the provision of certain documentation to the Trustee, including a certificate of a District Representative (as defined in the Indenture) stating that the certified assessed valuation of all taxable property in the Financing Districts for each of the prior two years as of the date of the final certification equals an amount that will permit the Financing Districts to levy and collect Pledged Revenue in subsequent years assuming 100% collection that will total at least one and twenty-five hundredths (1.25x) times the Maximum Annual Debt Service on all Outstanding Bonds and Parity Bonds and the Additional Bonds proposed to be issued. District No. 3 may use a rate of levy for Property Taxes of up to 50 mills for purposes of determining the ratio. For purposes of the foregoing, the Indenture defines Maximum Annual Debt Service as: as of any date of calculation and with respect to any annual period the sum of (i) the maximum amount of interest payable on all Outstanding Bonds and any Parity Bonds during such period (except to the extent that such interest is payable from the proceeds of such bonds set aside for such purpose), and (ii) the maximum amount of principal (or mandatory sinking fund or redemption fund) payments on such Outstanding Bonds and any Parity Bonds required in such annual period; computed on the assumption that no portion of such bonds shall cease to be outstanding in such period except by reason of the application of such scheduled payments. In addition, District No. 3 may issue Subordinate Bonds without the consent of the Owners of Bonds or any Parity Bonds then Outstanding, in order to acquire, construct and equip the Facilities pursuant to the Service Plan and to the extent permitted by law, subject to the submittal of certain documentation to the Trustee. Additional Covenants and Agreements of District No. 3. Pursuant to the Indenture, District No. 3 has further irrevocably covenanted and agreed with each and every Owner that so long as any of the Bonds remain Outstanding: (a) District No. 3 shall not dissolve, merge, or otherwise alter its corporate structure in any manner or to any extent as might materially adversely affect the security provided for the payment of the Bonds, and will continue to operate and manage District No. 3 and its facilities in an efficient and economical manner in accordance with all applicable laws, rules, and regulations; provided however, that the foregoing shall not prevent District No. 3 from dissolving pursuant to the provisions of the Act. (b) At least once a year District No. 3 will cause an audit to be performed of the records relating to its revenues and expenditures, and District No. 3 shall use its best efforts to have such audit report completed no later than 210 days after the end of any calendar year. The foregoing covenant shall apply notwithstanding any state law audit exemptions that may exist. In addition, at least once a year in the time and manner provided by law, District No. 3 will cause a budget to be prepared and adopted. Copies of the budget and the audit will be filed and recorded in the places, time, and manner provided by law. (c) District No. 3 will carry general liability coverage, worker s compensation, public liability, and such other forms of insurance on insurable District No. 3 property upon the terms and conditions, and issued by recognized insurance companies, as in the judgment of District No. 3 would ordinarily be carried by entities having similar properties of equal value, such insurance being in such amounts as will protect District No. 3 and its operations. 28

35 (d) Each official or other person having custody of any District No. 3 funds or responsible for the handling of such funds, shall be bonded or insured against theft or defalcation at all times. (e) In the event any ad valorem taxes are not paid when due, District No. 3 shall diligently cooperate with the appropriate county treasurer to enforce the lien of such unpaid taxes against the property for which the taxes are owed. (f) In the event the Pledged Revenue and other moneys available for payment of the Bonds is insufficient or is anticipated to be insufficient to pay the principal of, premium if any, and interest on the Bonds when due, District No. 3 shall use its best efforts to refinance, refund, or otherwise restructure the Bonds so as to avoid such insufficiency. (g) In the event that an exemption from registration for the Bonds under the Colorado Municipal Bond Supervision Act becomes available that permits the issuance or reissuance of the Bonds in denominations of $1,000 or integral multiples thereof, and if requested in writing by the Consent Parties with respect to not less than a majority in aggregate principal amount of the Bonds, District No. 3 shall, at the expense of the Consent Parties so requesting, use its good faith efforts to obtain such an exemption, amend the Indenture as may be required in connection therewith, and issue or reissue the Bonds in denominations of $1,000 or integral multiples thereof. Events of Default. The occurrence of any one or more of the following events or the existence of any one or more of the following conditions shall constitute an Event of Default under the Indenture (whatever the reason for such event or condition and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree, rule, regulation, or order of any court or any administrative or governmental body): (a) District No. 3 fails or refuses to impose the District No. 3 Required Mill Levy or to apply the Pledged Revenue as required by the Indenture; (b) District No. 2 fails or refuses to impose the mill levy required to be imposed by the 2014 Funding Agreement, or District No. 3 fails or refuses or to apply the Pledged Revenue derived from the 2014 Funding Agreement as required by the Indenture; (c) Any 2014 Funding Agreement Default (other than as described in (b) above) occurs and the defaulting party fails to remedy the same after notice thereof pursuant to the Indenture; (d) District No. 3 defaults in the performance or observance of any of the covenants, agreements, or conditions on the part of District No. 3 in the Indenture or the Bond Resolution (other than as described in (a) above) and fails to remedy the same after notice thereof pursuant to the Indenture; or (e) Any of the Districts files a petition under the federal bankruptcy laws or other applicable bankruptcy laws seeking to adjust the obligation represented by the Bonds, any Parity Bonds or the 2014 Funding Agreement. It is acknowledged that due to the limited nature of the Pledged Revenue, failure to pay the principal of or interest on the Bonds when due shall not, of itself, constitute an Event of Default hereunder. 29

36 Remedies on Occurrence of Event of Default. Upon the occurrence and continuance of an Event of Default, the Trustee shall have the following rights and remedies which may be pursued: (a) Receivership. Upon the filing of a bill in equity or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners, the Trustee shall be entitled as a matter of right to the appointment of a receiver or receivers of the Trust Estate, and of the revenues, income, product, and profits thereof pending such proceedings, subject however, to constitutional limitations inherent in the sovereignty of District No. 3; but notwithstanding the appointment of any receiver or other custodian, the Trustee shall be entitled to the possession and control of any cash, securities, or other instruments at the time held by, or payable or deliverable under the provisions of the Indenture to, the Trustee. (b) Suit for Judgment. The Trustee may proceed to protect and enforce its rights and the rights of the Owners under the Act, the Bonds, the Bond Resolution, the Indenture, the 2014 Funding Agreement and any provision of law by such suit, action, or special proceedings as the Trustee, being advised by Counsel, shall deem appropriate. (c) Mandamus or Other Suit. The Trustee may proceed by mandamus or any other suit, action, or proceeding at law or in equity, to enforce all rights of the Owners. No recovery of any judgment by the Trustee shall in any manner or to any extent affect the lien of the Indenture or any rights, powers, or remedies of the Trustee hereunder, or any lien, rights, powers, and remedies of the Owners of the Bonds, but such lien, rights, powers, and remedies of the Trustee and of the Owners shall continue unimpaired as before. If any Event of Default described in clause (a) or (b) under the caption Events of Default therein shall have occurred and if requested by the Owners of twenty-five percent (25%) of the principal amount of Bonds then Outstanding, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the Indenture (as described above) as the Trustee, being advised by Counsel, shall deem most expedient in the interests of the Owners; provided that the Trustee at its option shall be indemnified as provided in the Indenture. Notwithstanding anything therein to the contrary, acceleration of the Bonds shall not be an available remedy for an Event of Default. Control of Proceedings. The Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, at any time, to the extent permitted by law, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method, and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for the appointment of a receiver, and any other proceedings thereunder; provided that such direction shall not be otherwise than in accordance with the provisions thereof; and provided further that at its option the Trustee shall be indemnified as provided the Indenture. Rights and Remedies of Owners. No Owner of any Bond shall have any right to institute any suit, action, or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy thereunder, unless a default has occurred of which the Trustee has been notified as provided in the Indenture, or of which under the Indenture it is deemed to have notice, and unless such default shall have become an Event of Default and the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers granted or to institute such action, suit, or proceedings in their 30

37 own name, nor unless they have also offered to the Trustee indemnity as provided in the Indenture, nor unless the Trustee shall thereafter fail or refuse to exercise the powers thereinbefore granted, or to institute such action, suit, or proceeding in its own name; and such notification, request, and offer of indemnity are declared in every case at the option of the Trustee to be conditions precedent to any action or cause of action for the enforcement of the Indenture, or for the appointment of a receiver or for any other remedy thereunder; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatsoever to affect, disturb, or prejudice the lien of the Indenture by his, her, its, or their action, or to enforce any right thereunder except in the manner therein provided and that all proceedings at law or in equity shall be instituted, had, and maintained in the manner therein provided and for the equal benefit of the Owners of all Bonds then Outstanding. Supplemental Indentures Not Requiring Consent. Subject to the provisions of this section of the Indenture, District No. 3 and the Trustee may, without the consent of or notice to the Owners or Consent Parties, enter into such indentures supplemental thereto, which supplemental indentures shall thereafter form a part thereof, for any one or more of the following purposes: (a) To cure any ambiguity, to cure, correct, or supplement any formal defect or omission or inconsistent provision contained in the Indenture, to make any provision necessary or desirable due to a change in law, to make any provisions with respect to matters arising under the Indenture, or to make any provisions for any other purpose if such provisions are necessary or desirable and do not in the opinion of Counsel materially adversely affect the interests of the Owners of the Bonds; (b) To subject to the Indenture additional revenues, properties, or collateral; (c) To grant or confer upon the Trustee for the benefit of the Owners any additional rights, remedies, powers, or authority that may lawfully be granted to or conferred upon the Owners or the Trustee; and (d) To qualify the Indenture under the Trust Indenture Act of Supplemental Indentures Requiring Consent. Except for supplemental indentures delivered pursuant to the Indenture, and subject to the provisions of this section of the Indenture, the Consent Parties with respect to not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, to consent to and approve the execution by District No. 3 and the Trustee of such indenture or indentures supplemental thereto as shall be deemed necessary or desirable by District No. 3 for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Indenture; provided however, that without the consent of the Consent Parties with respect to all the Outstanding Bonds affected thereby, nothing therein contained shall permit, or be construed as permitting: (i) a change in the terms of the maturity of any Outstanding Bond, in the principal amount of any Outstanding Bond, in the optional or mandatory redemption provisions applicable thereto, or the rate of interest thereon; (ii) an impairment of the right of the Owners to institute suit for the enforcement of any payment of the principal of or interest on the Bonds when due; (iii) a privilege or priority of any Bond or any interest payment over any other Bond or interest payment; or 31

38 (iv) a reduction in the percentage in principal amount of the Outstanding Bonds, the consent of whose Owners or Consent Parties is required for any such supplemental indenture. Consent Party means the Owner of a Bond or, if such Bond is held in the name of Cede, the Participant (as determined by a list provided by DTC) with respect to such Bond. District No. 3 may at its option determine whether the Owner or the Participant is the Consent Party with respect to any particular amendment or other matter under the Indenture. Upon the execution of any supplemental indenture pursuant to the provisions of this section, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties, and obligations under the Indenture of District No. 3, the Trustee, and all Owners of Bonds then Outstanding shall thereafter be determined, exercised, and enforced thereunder, subject in all respects to such modifications and amendments. If at any time District No. 3 shall request the Trustee to enter into such supplemental indenture for any of the purposes of this section, the Trustee shall, upon being satisfactorily indemnified with respect to fees and expenses, cause notice of the proposed execution of such supplemental indenture to be given to each Owner of a Bond at the address shown on the registration books of the Trustee, prior to the proposed date of execution and delivery of any such supplemental indenture. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the principal corporate trust office of the Trustee for inspection by all Owners. If, within sixty (60) days or such longer period as shall be prescribed by District No. 3 following the giving of such notice, the Consent Parties with respect to not less than the required percentage in aggregate principal amount of the Bonds then Outstanding at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as therein provided, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or District No. 3 from executing the same or from taking any action pursuant to the provisions thereof. Discharge of the Lien of the Indenture. If District No. 3 shall pay or cause to be paid to the Trustee, for the Owners of the Bonds, the principal of, premium if any, and interest to become due thereon at the times and in the manner stipulated in the Indenture, and if District No. 3 shall keep, perform, and observe all and singular the covenants and promises in the Bonds and in the Indenture expressed to be kept, performed, and observed by it or on its part, and if all fees and expenses of the Trustee required by the Indenture to be paid shall have been paid, then these presents and the estate and rights hereby granted shall cease, determine, and be void, and thereupon the Trustee shall cancel and discharge the lien of the Indenture, and execute and deliver to District No. 3 such instruments in writing as shall be requisite to satisfy the lien thereof, and assign and deliver to District No. 3 any property at the time subject to the lien of the Indenture which may then be in its possession, and deliver any amounts required to be paid to District No. 3 under the Indenture, except for moneys and Federal Securities held by the Trustee for the payment of the principal of, premium if any, and interest on the Bonds. Any Bond shall, prior to the maturity or prior redemption thereof, be deemed to have been paid within the meaning and with the effect expressed in this section of the Indenture if, for the purpose of paying such Bond (i) there shall have been deposited with the Trustee an amount sufficient, without investment, to pay the principal of, premium if any, and interest on such Bond as the same becomes due at maturity or upon one or more designated prior redemption dates, or (ii) there shall have been placed in escrow and in trust with a commercial bank exercising trust powers, an amount sufficient (including the known minimum yield from Federal Securities in which such amount may be invested) to pay the principal of, premium if any, and interest on such Bond, as the same becomes due at maturity or upon one or more designated prior redemption dates. The Federal Securities in any such escrow shall not be subject 32

39 to redemption or prepayment at the option of the issuer, and shall become due at or prior to the respective times on which the proceeds thereof shall be needed, in accordance with a schedule established and agreed upon between District No. 3 and such bank at the time of the creation of the escrow, or the Federal Securities shall be subject to redemption at the option of the holders thereof to assure such availability as so needed to meet such schedule. The sufficiency of any such escrow funded with Federal Securities shall be determined by a Certified Public Accountant. Certified Public Accountant means an independent certified public accountant within the meaning of , C.R.S., and any amendment thereto, licensed to practice in the State of Colorado. Federal Securities means direct obligations of (including obligations issued or held in book entry form on the books of), or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America. Neither the Federal Securities, nor moneys deposited with the Trustee or placed in escrow and in trust pursuant to this section of the Indenture, nor principal or interest payments on any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium if any, and interest on the Bonds; provided however, that any cash received from such principal or interest payments on such Federal Securities, if not then needed for such purpose, shall, to the extent practicable, be reinvested subject to the provisions of Article Six of the Indenture in Federal Securities maturing at the times and in amounts sufficient to pay, when due, the principal of, premium if any, and interest on the Bonds. [Remainder of Page Intentionally Left Blank] 33

40 Debt Service Requirements Set forth in the following table are the debt service requirements for the Bonds, the Series 2014 Bonds and District No. 1 s Series 2010 Bonds (secured by ad valorem property taxes of the Financing Districts on a parity with the Bonds). See DEBT STRUCTURE General Obligation Debt. Year TABLE I Debt Service Requirements 1 The Bonds Series 2010 Series 2014 Annual Principal Interest Bonds 2 Bonds Total 2017 $ 150,000 $ 578,661 $ 658,775 $ 569,494 $ 1,956, , , , ,244 1,996, , , , ,994 1,999, , , , ,194 1,999, , , , ,194 1,998, , , , ,194 1,998, , , , ,194 1,997, , , , ,194 2,000, , , , ,194 1,995, , , , ,194 1,999, , , , ,194 1,996, , , , ,193 2,000, , , , ,975 1,997, , , , ,756 1,997, , , , ,537 1,999, , , , ,100 1,998, , , , ,662 1,999, , , , ,225 1,997, , , , ,000 1,996, , , , ,250 2,000, , , , ,750 2,000, , , , ,000 1,996, , , , ,250 1,998, , , , ,500 2,000, , , ,227,750 1,997, , , ,227,250 1,997, , , ,229,250 1,999, , , ,228,500 1,997, ,810, , ,995, ,905,000 95, ,000,250 Total $12,415,000 $13,075,911 $17,746,706 $16,672,232 $59,909,849 1 Assumes no redemptions, other than mandatory sinking fund redemptions, prior to maturity. Figures have been rounded and may differ from actual debt service payments. 2 Includes principal of and interest thereon for District No. 1 s Tax-Supported Revenue Refunding Bonds, Series 2010, and the Series 2014 Bonds secured by ad valorem property taxes of the Financing Districts on a parity with the Bonds. See THE BONDS Security for the Bonds. Source: The Underwriter 34

41 Debt Service Coverage The Bonds will be secured by the Pledged Revenue on parity with District No. 1 s Series 2010 Bonds, the Series 2014 Bonds and any other Parity Bonds. See THE BONDS Security for the Bonds. In accordance with the 2010 Indenture and the 2014 Indenture, issuance of the Bonds requires, among satisfaction of other conditions, that the certified assessed valuation of all taxable property in the Financing Districts for each of the prior two years as of the date of the final certification equals an amount that will permit the Financing Districts to levy and collect Pledged Revenue in subsequent years assuming 100% collection that will total at least one and twenty-five hundredths (1.25x) times the Maximum Annual Debt Service on all Outstanding Bonds and Parity Bonds and the Additional Bonds proposed to be issued. The Districts may use a rate of levy for Property Taxes of up to 50 mills for purposes of determining the ratio. The aggregate final certified assessed valuation of the Financing Districts in 2015 (for collection in 2016) was $47,464,192. The aggregate final certified assessed valuation of the Financing Districts in 2016 (for collection in 2017) is $49,613,643. The Underwriter has calculated that the foregoing 2015 and 2016 aggregate certified assessed valuation would produce Pledged Revenue (assuming a Required Mill Levy of 50 mills and an estimate of Specific Ownership Tax) of $2,501,244 and $2,614,515, respectively, which would result in debt service coverage for Maximum Annual Debt Service on the Bonds, the Series 2014 Bonds and the Series 2010 Bonds of 1.25x and approximately 1.31x, respectively. See RISK FACTORS Risk of Reductions in Assessed Value; Market Value of Land. The Financing Districts certified in 2015 (for collection in 2016) debt service mill levies of 40 mills. See FINANCIAL INFORMATION OF THE DISTRICTS. Pursuant to the Indenture, the Districts may issue additional Parity Bonds (secured by the Pledged Revenue on a parity with the Bonds, the Series 2014 Bonds and the Series 2010 Bonds), upon satisfaction of certain conditions, as more particularly described in Certain Indenture Provisions Additional Obligations above. THE DISTRICTS As used herein, Districts refers to Fossil Ridge Metropolitan Districts No. 1 3 collectively, Financing Districts refers to Fossil Ridge Metropolitan Districts Nos. 2 and 3 collectively, and District No. 3 refers to Fossil Ridge Metropolitan District No. 3. Only the Financing Districts are obligated to impose the Required Mill Levy for payment of the Bonds in accordance with the Indenture and the 2014 Funding Agreement. Organization and Description Each of the Districts is a quasi-municipal corporation and political subdivision of the State created pursuant to the Special District Act set forth in Title 32, Article 1, C.R.S., for the purpose of financing and constructing public improvements and for dedicating, when appropriate, such public improvements to such other entity as appropriate for the use and benefit of the Districts property owners. The creation of each of the Districts was ordered by the Jefferson County District Court after the approval by the proposed Districts electors at an election held for that purpose on November 7, The Districts currently encompass approximately acres, with substantially all such property coterminous with the boundaries of the Financing Districts which includes the property in the Development, as more particularly described in THE DEVELOPMENT. See District Powers Inclusions and Exclusions below. 35

42 Multiple District Structure; Master IGA Generally. Pursuant to the Service Plan, the Districts are to work in tandem to provide the Public Improvements necessary to serve the Districts. See Facilities and Services Provided by the Financing Districts below. The Service Plan provides that District No. 1 is to serve as the Service District, generally responsible for administering and managing the construction and operation of the Public Improvements, while District Nos. 2 and 3 are to serve as the Financing Districts, generally responsible for producing property tax and other revenue sufficient to pay the costs of operations and debt service expenses incurred for such Public Improvements. Any District is authorized under the Service Plan to issue debt for the purpose of funding Public Improvements. The Service Plan states that the multiple district structure is expected to provide several benefits to residents of the Development and the City and, in particular, will assure that: (a) the coordinated administration of construction and operation of public improvements; (b) maintenance of reasonably uniform mill levies and reasonable tax burdens in all areas of the Districts through the controlled management of financing and operation of public improvements; and (c) assured compliance with State laws regarding taxation in a manner which permits the issuance of tax exempt debt at the most favorable interest rates possible. Master IGA. In furtherance of the Service Plan, the Districts entered into a Master Intergovernmental District Facilities Construction and Service Agreement dated as of January 8, 2008 (the Master IGA ), for the purpose of setting forth the rights and obligations of the Districts with respect to the provision of the Public Improvements. Pursuant to the Master IGA, District No. 1 is to own (except as the same may be required to be dedicated to the City or other governmental entity), operate, maintain, and construct or coordinate the construction, acquisition, installation, financing, funding and reimbursement of expenditures related to the Public Improvements benefiting the Districts. In accordance with the Master IGA, the Financing Districts are to fully fund the costs relating to the construction, operation and maintenance of the Public Improvements (as more particularly defined therein, the Capital Costs ) and all costs incurred by District No. 1 in performance of its operation, maintenance management and administrative services under the Master IGA (as more particularly defined therein, the Service Costs ), subject to the limitations therein. The Master IGA provides that the Financing Districts are to impose ad valorem property taxes for the payment of such Capital Costs and Service Costs, subject to the limitations therein (including any applicable Service Plan limits) and also are to pay to District No. 1 the net proceeds of any bonds issued by the Financing Districts for application to Capital Costs. Pursuant to the Master IGA, in the event that the Financing Districts issue General Obligation Debt (as defined therein, including, with respect to District No. 3, the Bonds, the 2014 Bonds, and the 2010 Funding Agreement, and with respect to District No. 2, the 2010 Funding Agreement and the 2014 Funding Agreement), the Financing Districts obligations to pay Capital Costs and Service Costs are limited to the net revenue available after payment of amounts due on an annual basis are paid with respect to such General Obligation Debt. Furthermore, the Master IGA states that any obligation under the Master IGA is fully subordinated, at all points in time, to any General Obligation Debt and any Revenue Debt (generally meaning financial obligations payable from revenues other than property taxes) of the Financing Districts. The Master IGA also sets forth certain provisions pertaining to the process for the review of budgets, project plans and specifications, execution and prosecution of construction contracts, administrative management of the Districts, the establishment of user fees and transfer of funds between the Districts. 36

43 District Powers The rights, powers, privileges, authorities, functions and duties of District No. 3 and the other Districts are established by the laws of the State, particularly Title 32, Article 1, C.R.S. (as previously defined, the Special District Act ). The powers of the Districts are, however, limited both by the provisions of its Service Plan and its electoral authorization. Generally, the Districts have the power to have a perpetual existence; to enter into contracts and agreements; to sue and be sued and to be a party to suits, actions and proceedings; to borrow money and incur indebtedness and to issue bonds; to acquire, dispose of and encumber real and personal property, and any interest therein; to have the management, control and supervision of all the business and affairs of the Districts and all construction, installation, operation, and maintenance of improvements; to appoint, hire and retain agents, employees, engineers and attorneys; to fix and from time to time to increase or decrease fees, rates, tolls, penalties or charges for services, programs, or facilities furnished by the District; to furnish services and facilities within and without the boundaries of the Districts and to establish fees, rates, tolls, penalties or charges for such services and facilities; to accept real and personal property for use of the Districts and to accept gifts and conveyances made to the Districts; to adopt, amend and enforce bylaws and rules and regulations not in conflict with the Constitution of the State for carrying on the business, objects, and affairs of the Board; to enter into contracts with public utilities, cooperative electric associations, and municipalities for the purpose of providing street lighting service; and to have and exercise all rights and powers necessary in, incidental to or implied from the specific powers granted to the Districts. Subject to compliance with statutory procedures, the Board may order the inclusion or exclusion of real property to or from the Districts, as the case may be, thereby modifying the boundaries of any one or more of the Districts; however, any property excluded from the Districts subsequent to the issuance of the Bonds is obligated to the same extent as all other property within the Districts for the payment of the Bonds. Inclusions and Exclusions. Subject to compliance with statutory procedures, the Board may order the inclusion or exclusion of real property to or from the Districts, as the case may be, thereby modifying the boundaries of the Districts. Such included or excluded property is obligated to the same extent as all other property within the Districts for the payment of then outstanding Districts indebtedness and subsequent refundings thereof, notwithstanding the exclusion. Boundary changes resulting from property included or excluded to or from a District prior to the first day of May of each year are reflected in such District s assessed valuation and are subject to the ad valorem property tax levy of the District for that assessment year. Inclusions or exclusions that occur after May 1 are considered in the following assessment year. When created, the Districts originally encompassed approximately acres, approximately acres of which comprised District No. 3, approximately acres of which comprised District No. 2 and approximately acres of which comprised District No. 1. Following subsequent orders of inclusions and exclusions, the Districts currently encompass approximately acres, approximately acres of which comprise District No. 3, approximately acres of which comprise District No. 2 and approximately 10 square feet of which comprise District No. 1. There are no additional inclusions or exclusions anticipated affecting the Districts. Governing Board Each of the Districts is governed by a board of directors pursuant to state law (collectively, the Boards ). The members must be electors of each applicable District, as defined by state law, and are elected to alternating four year terms of office at successive biennial elections. Vacancies on the Boards 37

44 are filled by appointment of the remaining directors, the appointee to serve until the next regular election, at which time the vacancy is filled by election for any remaining unexpired portion of the term. Directors can receive a maximum compensation of $1,600 per year, not to exceed $100 per meeting attended. Directors are not compensated for meeting attendance. Pursuant to statute, with certain exceptions, no nonjudicial elected official of any political subdivision of the State can serve more than two consecutive terms in office; however, such term limitation may be lengthened, shortened or eliminated pursuant to voter approval. Voters in the Districts have voted to waive the statutory term limits, and therefore District directors are not subject to such limitations. The present directors, their positions, principal occupations and terms of office for the directors of the Financing Districts are as follows. Financing Districts Boards of Directors Name Office Principal Occupation Years of Service on Board Term Expires (May) District No. 2 Marc Savela President Senior Director Land Development Tom Waterman Vice President Independent Consultant Ashley Tarufelli Secretary/Treasurer Vice President - Finance Neil Simpson Assistant Secretary Accounting Manager Kathleen Kelly Assistant Secretary President, Precision Medical Co District No. 3 Marc Savela President Senior Director Land Development Jeffrey Becker Vice President Attorney Neil Simpson Assistant Secretary Accounting Manager Ashley Tarufelli Secretary/Treasurer Vice President - Finance John Corbett Assistant Secretary Business Development Specialist Reflects the Board member s position with the Developer. 2 Appointed on March 10, 2015 to fill a vacancy. 3 Appointed on August 30, 2016 to fill a vacancy. Pursuant to State law, directors are required to disclose to the Colorado Secretary of State and the Board potential conflicts of interest or personal or private interests which are proposed or pending before the Board. According to disclosure statements filed with the Secretary of State and the Districts by Board members prior to taking any official action relating to this Official Statement or amendments to the Indenture and the Funding Agreements undertaken as a result of the proposed re-offering of the Bonds as described herein, Mr. Savela, Ms. Tarufelli and Mr. Simpson have disclosed their potential or existing personal or private interests relating to the same due to their relationships with the Developer and current Owners of the Bonds, because they are one or more of the following: an owner or principal in the Developer, an employee of the Developer, or an owner or employee of an affiliate of the Developer. Administration The Boards are responsible for the overall management and administration of the affairs of the Districts. The Districts have no employees. The Districts retains White Bear Ankele Tanaka & Waldron Professional Corporation, Centennial, Colorado, as General Counsel; Simmons & Wheeler, P.C., Centennial, Colorado as their accountant; L. Paul Goedecke, P.C., Certified Public Accountants, 38

45 Lakewood, Colorado as their auditor and Overlook Property Management, Centennial, Colorado as their manager. Facilities and Services Provided by the Financing Districts As set forth in the Service Plan, the Districts are authorized to construct Public Improvements including, but not limited to, water, streets, traffic and safety controls, park and recreation, sanitation, mosquito and pest control, security, and covenant control improvements and facilities within their boundaries. The Service District (District No. 1) is responsible for managing the construction and operation of the Public Improvements and services needed to serve the Development and the Financing Districts are responsible for funding the costs of the same in accordance with the Master IGA. See Multiple District Structure; Master IGA above. District No. 1 presently owns, operates and maintains the Fossil Ridge Sewer System (as more particularly described in Material Agreements of the Districts Intergovernmental Agreements Concerning Sewer System below) and certain landscaping and entry monuments. District No. 1 also owns and manages The Retreat community area, as more particularly described in Development Within the Districts below. Services Provided by other Governmental Entities. Residents of the Districts are provided a wide range of services by various entities other than the Districts. The Development receives police protection from the City and fire protection is provided by West Metro Fire Protection District. Natural gas service is provided by Xcel Energy (if available) and electrical service is provided by Xcel Energy. The Development receives water service from Consolidated Mutual Water and sewer service from Green Mountain Water and Sanitation District. Development Within the Districts The Solterra Development. The Development is a residential community (comprising approximately acres) and is located in the City approximately a quarter mile east of State Highway C-470 and south of Alameda Parkway. The property within the Financing Districts contains approximately 1,325 platted single family and multi-family lots. As of September 30, 2016, 1,046 lots, or 78.9% of the platted lots, had been sold to homebuilders, and 291 lots remained for sale by the Developer. Of the 1,046 lots which have been sold to homebuilders, approximately 870 homes have been completed and were occupied by homeowners (65.7% of the total platted lots). The remaining 176 lots owned by homebuilders are either for sale or are held by the homebuilders in inventory. Homebuilders currently active in the District include Cardel, Infinity, and Brookfield Residential. The Development also includes The Retreat, a community area comprised of an infinity edge pool, fitness area for professionally-taught classes, several patio areas, an outdoor fireplace, amphitheater and a clubhouse (including a large entertaining room and kitchen area with full appliances, bar and dining room). The Retreat is owned and managed by District No. 1. Since 2006, development within the Financing Districts has been undertaken by Solterra LLC (f/k/a Carma Lakewood, LLC), a Colorado limited liability company (as previously defined, the Developer ), which is wholly owned by Brookfield Residential Properties, Inc. ("BRPI"). A brief description of BRPI follows. BRPI. BRPI is a wholly-owned subsidiary of Brookfield Asset Management Inc. and has been developing land and building homes for over 50 years. BRPI was previously a publicly traded company listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol BRP. On March 13, 2015, Brookfield Asset Management Inc. and BRPI completed the closing of a privatization 39

46 transaction of BRPI, pursuant to which Ontario Inc., a wholly-owned subsidiary of Brookfield Asset Management Inc., acquired all of the issued and outstanding Common Shares of BRPI that Brookfield Asset Management Inc. did not already own by way of a plan of arrangement. BRPI is a leading North American homebuilder and land developer with operations in Canada and the United States with operating segments in Alberta (Calgary and Edmonton), Ontario (Toronto), Northern California (San Francisco Bay Area and Sacramento), Southern California (Los Angeles/Southland and San Diego/Riverside), Washington D.C. Area, Colorado (Denver), Texas (Austin), Arizona (Phoenix), and Hawaii. BRPI entitles and develops land and builds homes for its own communities, as well as sells lots to third-party builders. For the year ended December 31, 2015, BRPI had a total of 2,656 home closings, 2,760 lots sold to homebuilders and controlled 95,762 lots. As of December 31, 2015, BRPI had $3.6 billion in assets (including $2.7 billion in housing and land inventory), $2.239 billion in debt and other liabilities and $1.351 billion in equity. For a more complete description of BRPI, investors should seek additional information at The information contained herein is not intended to be a comprehensive description of BRPI and its activities. For a more complete description of BRPI, investors should seek additional information from the Commission as described above, and from BRPI, at The contents of such website are not incorporated by reference into this Official Statement. The feasibility of payment of the Bonds has been assessed by District No. 3 based solely on the existing aggregate assessed valuation of the Financing Districts without taking into account future development. No assurance is given as to the timing or anticipated valuation of any future development (if any) within the Financing Districts. This Official Statement does not purport to provide complete information material to the assessment of any future development within the Financing Districts and the Pledged Revenue that may result therefrom. Material Agreements of the Districts The Special District Act authorizes the Districts to enter into agreements and contracts affecting their affairs. According to the Districts general counsel, neither of the Financing Districts is a party to any agreement which materially affects its financial status or operations, except for the Master IGA described in Multiple District Structure; Master IGA above and the Funding Agreements described in THE BONDS Security for the Bonds Joint Funding Agreements. However, District No. 1 has entered into the following additional agreements described below which, as a result of the Master IGA, could impact the financial status or operations of the Financing Districts. Reimbursement and Acquisition Agreement. In order to induce the provision of certain Public Improvements by the Developer, District No. 1 and the Developer entered into a Reimbursement of Developer Loan and Public Infrastructure Acquisition Agreement dated as of May 13, 2008 (the Reimbursement and Acquisition Agreement ) to provide for District No. 1 s reimbursement of amounts expended by the Developer on the District Eligible Costs (defined below), in amounts not to exceed $91,000,000, as authorized by the Service Plan. District Eligible Costs include costs relating to the provision of Public Improvements, including but not limited to any costs relating to organizing the Districts, general administration, operations and maintenance, engineering, surveying, the costs of acquiring land necessary for the Public Improvements, and construction and/or acquisition of the Public Improvements. The Reimbursement and Acquisition Agreement contemplates that such District Eligible Costs may be paid by the Developer on behalf of District No. 1, funded directly to District No. 1 by the Developer, or may be payable as a result of District No. 1 s acquisition of the related Public Improvements, and that District No. 1 will acquire Public Improvements constructed by the Developer, subject to a District engineer s certification of costs and other procedures set forth in the Reimbursement 40

47 and Acquisition Agreement. The Developer is under no obligation to provide Public Improvements or advance funds to District No. 1 for District Eligible Costs. District No. 1 has agreed to repay, when due, together with interest thereon, any Repayment Obligations (defined below) owed under the Reimbursement and Acquisition Agreement from proceeds of bonds of the Financing Districts, if any, provided to District No. 1 pursuant to the terms of the Master IGA, net of any costs of issuance, underwriter discount, or reasonably required reserves of said bonds (the Net Proceeds ), and, at District No. 1 s discretion, any other legally available revenues of District No. 1 (to include amounts available under the Master IGA); provided, however, that at such time as the Financing Districts have issued the maximum amount of bonds permitted to be issued in accordance with the Service Plan and the 2006 Election, and such Net Proceeds have been remitted to District No. 1 and paid to the Developer, any remaining Repayment Obligations are to be deemed contributions by the Developer to District No. 1, and District No. 1 s obligation to repay such amounts is to be discharged in its entirety, unless otherwise agreed by District No. 1 and permitted under the Service Plan and the 2006 Election. District No. 1 s obligation under the Reimbursement and Acquisition Agreement constitutes a multiple fiscal year obligation, for which District No. 1 has obtained electoral authorization. Repayment Obligations are to bear simple interest at a rate of 6.00% per annum. A Repayment Obligation will arise under the Reimbursement and Acquisition Agreement upon the Developer s deposit of funds with District No. 1 or acceptance by District No. 1 of Public Improvements constructed by the Developer. The District Eligible Costs payable by District No. 1 under the Reimbursement and Acquisition Agreement constitute Capital Costs and Service Costs payable by the Financing Districts in accordance with the Master IGA. See Multiple District Structure; Master IGA above. As of December 31, 2015, District No. 1 s reimbursement obligation for capital costs pursuant to the Reimbursement and Acquisition Agreement was approximately $49,035,747 plus $5,056,634 in accrued interest thereon (such amounts as reflected in District No. 1 s audit). As of October 31, 2016, District No. 1 s reimbursement obligation for capital costs pursuant to the Reimbursement and Acquisition Agreement was $51,610, plus $7,571, in accrued interest thereon (both such amounts unaudited). It is anticipated that approximately $12,591, in net proceeds of the Bonds will be applied to such amounts. Such amounts consist solely of the actual construction cost of public improvements, as certified by an independent engineer. In addition, as of December 31, 2015, District No. 1 s reimbursement obligation for administration and operations costs pursuant to the Reimbursement and Acquisition Agreement was approximately $808,257 plus $224,797 in accrued interest thereon (such amounts as reflected in District No. 1 s audit). As of October 31, 2016, District No. 1 s reimbursement obligation for administration and operations costs pursuant to the Reimbursement and Acquisition Agreement was $811, plus $265, in accrued interest thereon (both such amounts unaudited). Intergovernmental Agreements Concerning Sewer System. District No. 1 and Green Mountain Water and Sanitation District ( Green Mountain ) entered in an Intergovernmental Agreement for Extra- Territorial Sewer Service dated January 15, 2008, as amended and restated by the Amended and Restated Intergovernmental Agreement for Extra-Territorial Sewer Service dated November 11, 2014 (as amended and restated, the Sewer IGA ), pursuant to which District No. 1 is to collect wastewater from the Development and deliver the wastewater to Green Mountain for conveyance to the Metropolitan Denver Wastewater Reclamation District ( Metro ) for disposal. Green Mountain agrees to accept wastewater from District No. 1, which is collected from and generated within the Development and does not exceed 1,727 equivalent residential units ( EQRs ), pursuant to all of the terms contained therein. The service commitment by Green Mountain is subject to all restrictive provisions and conditions of the Special Connectors Agreement between Green Mountain and Metro. Green Mountain agrees to reserve sufficient 41

48 capacity in its Green Mountain Wastewater Collection System to accommodate 1,727 EQRs received from District No. 1 (the Reserved Capacity ) for a period of fifteen (15) years from January 15, 2008, provided that District No. 1 is in compliance with the terms and conditions of the Sewer IGA. As a condition to Green Mountain fulfilling such sewer service obligation, District No. 1 is to design and construct, or contract for the design and construction of a system of infrastructure, including sewer main lines, lift stations and monitoring stations, necessary to deliver wastewater from the Development to the Green Mountain Wastewater Collection System (the Fossil Ridge Sewer System ), at its sole cost and expense and in accordance with all terms of the Sewer IGA and all rules and regulations and design standards, criteria and specifications of Green Mountain. The Sewer IGA also requires that District No. 1: (i) fund the upgrading or upsizing of certain public improvements and infrastructure of Green Mountain in order to accommodate the wastewater flow from the Development, subject to cost recovery of such amounts from the rebate by Green Mountain of a portion of certain system development fees otherwise payable by District No. 1 as described below, and (ii) oversize certain of the Fossil Ridge Sewer System facilities to accommodate identified future development areas located outside the Development; provided, however that, prior to the provision of service thereto, Green Mountain is to require owners of such future development areas to enter into agreements with District No. 1 providing for, among other things, equitable and proportionate cost recovery for District No. 1 s expense in oversizing the Fossil Ridge Sewer System. Pursuant to estimates of the Districts engineer, approximately 85% of the total improvements anticipated to be constructed by District No. 1 in accordance with the Sewer IGA have been completed to date. Fees. Before connecting any new customer to the Fossil Ridge Sewer System, District No. 1 is to pay to Green Mountain the current system development fee (referred to as the Sewer SDF) as set by the Green Mountain Board of Directors, and the then-current system development fee imposed by Metro. The Metro fee is to be paid directly to the City. District No. 1 is also to pay quarterly, in advance: (i) Service Fees, comprised of a residential service fee and a commercial/multifamily service fee, to be separately calculated for residential and commercial/multi-family EQRs pursuant to a formula set forth in the Sewer IGA, and (ii) Operations Fees, calculated per EQR to equal the then-current in-district operations fee (bimonthly) multiplied by 1.25 multiplied by 1.5 (to convert from bimonthly to quarterly) multiplied by 0.36 (or other percentage deemed by Green Mountain to be the percentage of the operations fee attributable to sanitation services costs), both in accordance with rates set by Green Mountain. Finally, if any user within the Development is served by the Tamarisk Lift Station, District No. 1 is to pay for each EQR so served, a Tamarisk Lift Station Surcharge to Green Mountain on a quarterly basis, in advance, to cover the extra costs associated with operating, maintaining and replacing the Tamarisk Lift Station or its component parts or equipment. All such fees are imposed by the Districts on the owners of property located within their boundaries pursuant to a joint fee resolution adopted December 9, All such fees collected by the Districts are paid to Green Mountain in accordance with the Sewer IGA. Maintenance. In furtherance of the Sewer IGA, District No. 1 and Green Mountain entered into an Intergovernmental Agreement for Maintenance and Repair of Sewer System dated as of September 19, 2008 (the Sewer Maintenance IGA ). Pursuant to the Sewer Maintenance IGA, Green Mountain is to perform the maintenance and repair services for the Development s sewer system and will charge a fee for such services pursuant to a rate schedule set forth therein. Intergovernmental Agreement between the City and District No. 1. District No. 1 and the City entered into an Intergovernmental Agreement Relating to Maintenance dated April 22, 2008, as amended and restated on December 13, 2013 by that First Amended and Restated Intergovernmental Agreement Relating to Maintenance, and further amended by the First Addendum to First Amended and Restated Intergovernmental Agreement Relating to Maintenance dated September 12, 2016 (as amended and restated, the City IGA ). Pursuant to the City IGA, due to the uniqueness of certain improvements in the 42

49 Development (as more particularly set forth therein), District No. 1 has agreed to perform certain of the maintenance functions normally performed by the City. District No. 1 is responsible for the costs of any such maintenance. The initial term of the City IGA was for one calendar year ending December 31, 2008, automatically renewing for successive one year periods unless a party notifies in writing the other party prior to November 1 of any year that it does not wish to renew. The City IGA remains in effect as of the date hereof. Ad Valorem Property Taxes FINANCIAL INFORMATION OF THE DISTRICTS The Board has the power, subject to constitutional and statutory guidelines, to certify a levy for collection of ad valorem taxes against all taxable property of the District. Property taxes are uniformly levied against the assessed valuation of all taxable property of the District. The property subject to taxation, the assessment of such property, and the property tax procedure and collections are discussed below. Property Tax Reduction for Senior Citizens and Disabled Veterans. On November 7, 2000 and November 7, 2006, respectively, the electors of the State approved Referendum A and Referendum E, constitutional amendments granting a property tax reduction to qualified senior citizens and qualified disabled veterans. Generally, the reduction (a) reduces property taxes for qualified senior citizens and qualified disabled veterans by exempting 50% of the first $200,000 of actual value of residential property from property taxation; (b) requires that the State reimburse all local governments for any decrease in property tax revenue resulting from the reduction; and (c) excludes the State reimbursement to local governments from the revenue and spending limits established under Article X, Section 20 of the State Constitution. Property Subject to Taxation. Both real and personal property located within the boundaries of the District, unless exempt, are subject to taxation by the District. Exempt property generally includes property of the United States of America; property of the State and its political subdivisions; public libraries; public school property; charitable property; religious property; irrigation ditches, canals and flumes; household furnishings; personal effects; intangible personal property; inventories of merchandise and materials and supplies which are held for consumption by a business or are held primarily for sale; livestock; agricultural and livestock products; agricultural equipment which is used on the farm or ranch in the production of agricultural products; and nonprofit cemeteries. Assessment of Property. All taxable property is listed, appraised and valued for assessment as of January 1 of each year by the county assessor. The actual value, with certain exceptions, is determined by the county assessor annually based on a biennially recalculated level of value set on January 1 of each odd-numbered year. The level of value is ascertained for each two-year reassessment period from manuals and associated data prepared and published by the State property tax administrator for the eighteen-month period ending on the June 30 immediately prior to the beginning of each two-year reassessment period. For example, actual values for the 2015 levy/2016 collection year as well as the 2016 levy/2017 collection year are based on market data obtained from the period January 1, 2013 June 30, The level of value calculation does not change for even-numbered years. The classes of property the actual value of which is not determined by a level of value include oil and gas leaseholds and lands, producing mines and other lands producing nonmetallic minerals. The assessed value of taxable property is then determined by multiplying the actual value (determined as described in the immediately preceding paragraph) times an assessment ratio. The assessment ratio of residential property changes from year to year based on a constitutionally mandated 43

50 requirement to keep the ratio of the assessed value of commercial property to residential property at the same level as it was in the property tax year commencing January 1, 1985 (the Gallagher Amendment ). The Gallagher Amendment requires that statewide residential assessed values must be approximately 45% of the total assessed value in the State with commercial and other assessed values making up the other 55% of the assessed values in the State. In order to maintain this 45% to 55% ratio, the commercial assessment rate is established at 29% of the actual value of commercial property (including vacant land and undeveloped lots) and the residential assessment rate fluctuates. The residential ratio has remained 7.96% since the 2003 levy year. The Colorado Legislative Council Staff s Focus Colorado: Economic and Revenue Forecast dated December 21, 2015 (the Forecast ), projects that the residential assessment ratio will decrease to 7.78% for the 2017 reassessment period. Beginning in May of each year each county assessor hears taxpayers objections to property valuations, and the county board of equalization hears assessment appeals. The assessor is required to complete the assessment roll of all taxable property no later than August 25 each year. The abstract of assessment prepared therefrom is reviewed by the State property tax administrator. Assessments are also subject to review at various stages by the State board of equalization, the State board of assessment appeals and the State courts. Therefore, the District s assessed valuation may be subject to modification as a result of the review of such entities. In the instance of the erroneous levy of taxes, an abatement or refund must be authorized by the board of county commissioners; and in no case will an abatement or refund of taxes be made unless a petition for abatement or refund is filed within two years after January 1 of the year following the year in which the taxes were levied. Refunded or abated taxes are prorated among all taxing jurisdictions which levied a tax against the property. Taxation Procedure. The assessed valuation and statutory actual valuation of taxable property within the District are required to be certified by the county assessor to the District no later than August 25 of each year. Such value is subject to recertification by the county assessor prior to December 10 of each year. The Board then determines a rate of levy which, when levied upon such certified assessed valuation, and together with other legally available revenues, will raise the amount required annually by the District for its General Fund and Debt Service Fund to defray its expenditures during the ensuing fiscal year. In determining the rate of levy, the Board must take into consideration the limitations on certain increases in property tax revenues as described in Constitutional Amendment Limiting Taxes and Spending and Budget and Appropriation Procedure below. The Board must certify the District s levy to the board of county commissioners no later than December 15 of each year. Upon receipt of the tax levy certification of the District and other taxing entities within the county, the board of county commissioners levies against the assessed valuation of all taxable property within the county the applicable property taxes. Such levies are certified by the board of county commissioners to the county assessor, who thereupon delivers the tax list and warrant to the county treasurer for the collection of taxes. Property Tax Collections. Taxes levied in one year are collected in the succeeding year. Taxes certified in 2016, for example, will be collected in Taxes are due on January 1 in the year of collection; however, they may be paid in either one installment (not later than the last day of April) or two equal installments (not later than the last day of February and June 15) without interest or penalty. Taxes which are not paid within the prescribed time bear interest at the rate of 1% per month until paid. Unpaid amounts and the accrued interest thereon become delinquent on June 16 of the collection year. The county treasurer collects current and delinquent property taxes, as well as any interest, penalties, and other requirements and remits the amounts collected on behalf of the District to the District on a monthly basis. 44

51 All taxes levied on real and personal property, together with any interest and penalties prescribed by law, as well as other costs of collection, until paid, constitute a perpetual lien on and against the taxed property. Such lien is on parity with the liens of other general taxes. It is the county treasurers duty to enforce the collection of delinquent real property taxes by sale of the tax lien on such realty in December of the collection year and of delinquent personal property taxes by the distraint, seizure and sale of such property at any time after October 1 of the collection year. There can be no assurance, however, that the value of taxes, penalty interest and costs due on the property can be recovered by the county treasurer. Further, the treasurer may set a minimum total amount below which competitive bids will not be accepted, in which event property for which acceptable bids are not received will be set off to the county. Taxes on real and personal property may be determined to be uncollectible after a period of six years from the date of becoming delinquent and cancelled by the board of county commissioners. Ad Valorem Property Tax Data The assessed valuation, debt service mill levies and property tax collections of the Financing District from 2011 to date are set forth in the following tables. See Ad Valorem Property Taxes Assessment of Property above for a description of the assessment ratios for taxable property used in each of such years. See Constitutional Amendment Limiting Taxes and Spending below. TABLE II History of District No. 2 s Assessed Valuation, Mill Levies and Property Tax Collections Levy/Collection Year Assessed Valuation Percent Change General Fund Mill Levy Bond Fund Mill Levy Taxes Levied Taxes Collected /2012 $10,435, $313,069 $312, / ,679, % , , / ,648, , , / ,615, , , / ,546, , , / ,055, , Property taxes collected in any one year include collection of delinquent property taxes levied and/or abatements or valuations in prior years. 2 Includes 5.00 mills levied for payment to District No. 1 for operations as set forth in the Master IGA. 3 Property tax collections through September 30, Preliminary budgeted mill levies subject to change prior to the certification date of December 15, Sources: State of Colorado, Division of Property Taxation, Annual Reports, ; Jefferson County Assessor s and Treasurer s Offices and District No. 2 s audited financial statements for the year ended December 31,

52 TABLE III History of District No. 3 s Assessed Valuation, Bond Mill Levy and Property Tax Collections Levy/Collection Year Assessed Valuation Percent Change General Fund Mill Levy Bond Fund Mill Levy Taxes Levied Taxes Collected /2012 $10,780, $ 323,405 $ 312, / ,909, % , , / ,585, , , / ,998, , , / ,917, ,076,692 1,072, / ,558, Property taxes collected in any one year include collection of delinquent property taxes levied and/or abatements or valuations in prior years. 2 Includes 5.00 mills levied for payment to District No. 1 for operations as set forth in the Master IGA. 3 Property tax collections through September 30, Preliminary budgeted mill levies subject to change prior to the certification date of December 15, Sources: State of Colorado, Division of Property Taxation, Annual Reports, Jefferson County Assessor s, Jefferson County Treasurer s Offices and District No. 3 s audited financial statements for the year ended December 31,2015 The following table sets forth the 2016 (for the 2017 tax collection year) certified assessed and actual valuations of specific classes of property within the Financing Districts. TABLE IV 2016 Assessed and Actual Valuation of Classes of Property in District No. 2 Class Assessed Valuation Percent of Assessed Valuation Actual Valuation Percent of Actual Valuation Residential $19,836, % $249,207, % Vacant 1,152, ,974, Commercial 65, , Natural Resources Total $21,055, % $253,409, % Source: Jefferson County Assessor s Office TABLE V 2016 Assessed and Actual Valuation of Classes of Property in District No. 3 Class Assessed Valuation Percent of Assessed Valuation Actual Valuation Percent of Actual Valuation Residential $22,493, % $282,586, % Vacant 6,010, ,727, Commercial 51, , State Assessed 1, , Total $28,558, % $303,497, % Source: Jefferson County Assessor s Office 46

53 Largest Taxpayers. The Developer is the largest taxpayer/property owner within the Financing Districts, owning properties with a 2016 assessed valuation of $484,968 and $1,693,197 in District No. 2 and District No. 3, respectively, totaling $2,178,165, or approximately 4.39% of the total assessed valuation of the Financing Districts. The remaining property owners consist primarily of individual property/homeowners. Overlapping Mill Levies Numerous entities located wholly or partially within the Financing Districts are authorized to levy taxes on property located within the Financing Districts. According to the Jefferson County Assessor s Office, there are currently eight entities overlapping all or a portion of the Districts. As a result, property owners within the Financing Districts may be subject to various mill levies depending upon the location of their property. The following table is representative of a sample total 2015 mill levy (for payment in 2016) attributable to taxpayers within the Financing Districts and is not intended to portray the mills levied against all properties within each Financing District. Additional taxing entities may overlap the Financing Districts in the future. See also DEBT STRUCTURE General Obligation Debt. TABLE VI Sample Total 2015 Mill Levy 1 Taxing Entity Mill Levy District Fees Jefferson County Jefferson County School District No. R Lakewood (City of) Mount Carbon Metropolitan District (exclusion areas) Regional Transportation District Urban Drainage & Flood Control District Urban Drainage & Flood Control South Platte West Metro Fire Protection District Sample Overlapping Mill Levy The Financing Districts Sample Total Mill Levy One mill equals 1/10 of one cent. Mill levies certified in 2015 are for the collection of ad valorem property taxes in Certified mill levies for 2015 (for collection in 2016) are not yet available from the County. 2 In 1997, Mt. Carbon filed for protection under Chapter 9 of the U.S. Bankruptcy Court. In 2004, bonds were issued by Mt. Carbon (the Mt. Carbon 2004 Bonds ) to consummate and effectuate the terms for Mt. Carbon s Seventh Amended Plan for Adjustment of Debts. Subsequently, all property within the boundaries of the Districts was excluded from Mt. Carbon. However, all such property excluded from the boundaries is to continue to be subject to a mill levy of 20 mills for debt service for the payment of the Mt. Carbon 2004 Bonds, which obligation terminates upon the earlier of the payment in full of the Mt. Carbon 2004 Bonds or June 2, The Financing Districts each imposed in 2015 (for collection in 2016) a debt service mill levy of 40 mills. Source: Jefferson County Assessor s Office Combined Fee Resolution. The Districts adopted a Joint Resolution concerning the Imposition of District fees, dated as of February 13, 2007, which was amended by that Amended and Restated Joint Resolution Concerning the Imposition of District Fees, dated March 10, 2009, and that Second Amended and Restated Joint Resolution Concerning the Imposition of District Fees, dated October 19,

54 (collectively, the Prior Fee Resolution ). On December 9, 2015, the Boards adopted the Third Amended and Restated Resolution of the Board of the District Concerning the Imposition of Districts Fees (the Current Fee Resolution ) to amend and restate the Prior Fee Resolution in its entirety. Any fees, rates, tolls, penalties or charges due under the Prior Fee Resolution, to the extent outstanding and unpaid, remain in effect until fully paid and have not been eliminated. Pursuant to the Current Fee Resolution, and in furtherance of the Districts Service Plan, the Districts are authorized to impose the following fees. All fees imposed in accordance with the Current Fee Resolution are payable to District No. 1. Development Fee. A one-time Development Fee was established to be imposed upon each lot for services provided in connection with the construction operation and maintenance of public facilities. The Development Fee is to be imposed at a rate established by the Districts from time to time pursuant to an annual schedule of fees and may be automatically increased by 5% rounded to the nearest $25 on January 1 of each year commencing January 1, 2017 until no dwelling units remain to be constructed within the Districts. The current Development Fee is $4,200 for a detached single family home, $3,150 for a townhome or condominium and $1,575 for a rental unit within an apartment building. Storm Drainage Development Fee. A one-time Storm Drainage Development Fee was established to be imposed upon each lot for services provided in connection with the construction operation and maintenance of public facilities. The Storm Drainage Development Fee is to be imposed at a rate established by the Districts from time to time pursuant to an annual schedule of fees. The current Storm Drainage Development Fee is $1,000 for a detached single family home, $750 for a townhome or condominium and $500 for a rental unit within an apartment building. Operations Fee. An Operations Fee was established to be imposed upon each residential unit for services provided in connection with the construction operation and maintenance of public facilities within the legal boundaries of the Districts. The Operations Fee is to be imposed at a rate established by the Districts from time to time pursuant to an annual schedule of fees. The Operations Fee is first due and owning as of the earliest to occur of: (i) the date upon which a certificate of occupancy is issued; (ii) the date of transfer of a lot or residential unit from a homebuilder to a third-party buyer; or (iii) when the lot or residential unit is occupied for residential use. The current Operations Fee is $756 per year. Administrative and Set-Up Fees. The Current Fee Resolution also authorizes the District manager to charge an administrative set up fee in connection with all new accounts of the District. The current Administrative and Set-Up Fee is $125/unit. Landscape Fee and Set-Up Fee. Pursuant to the Current Fee Resolution a Landscape Fee is imposed for the costs associated with constructing and maintaining landscaping improvements within certain defined areas of the Districts upon each lot. The Landscape Fee is to be imposed at a rate established by the Districts from time to time pursuant to an annual schedule of fees. The Landscape Fee is first due and owning as of the earliest to occur of: (i) the date upon which a certificate of occupancy is issued; (ii) the date of transfer of a lot or residential unit from a homebuilder to a third-party buyer; or (iii) when the lot or residential unit is occupied for residential use. The current Landscape Fee is $15/month/unit. In addition, a one-time Landscape Administrative Set-Up Fee of $5/unit is assessed against each lot. Maintenance Fee. A Maintenance Fee is established for the costs associated with maintaining landscaping and other improvements within certain defined areas of the Districts. The Maintenance Fee is to be imposed at a rate established by the Districts from time to time pursuant to an annual schedule of fees. The Maintenance Fee is first due and owning as of the earliest to occur of: (i) the date upon which a certificate of occupancy is issued; (ii) the date of transfer of a lot or residential unit from a homebuilder to 48

55 a third-party buyer; or (iii) when the lot or residential unit is occupied for residential use. The current Maintenance Fee is $25/month/unit. Amenity User Fee. District No. 1 collects amenity user fees pursuant to rental agreements for the reservation of portions of The Retreat for private parties and events. Rates vary based on the space and time periods reserved, and are subject to change. The Retreat, which is owned and operated by District No. 1, is comprised of an infinity edge pool, fitness area, several patio areas, an outdoor fireplace, amphitheater and a clubhouse. Specific Ownership Tax Specific ownership tax represents the amounts received by the Districts from the State pursuant to statute primarily on motor vehicle licensing. Such tax is collected by all counties and distributed to every taxing entity within a county, such as the Districts, in the proportion that the taxing entity s ad valorem taxes represents the cumulative amount of ad valorem taxes levied county wide. All specific ownership taxes received by the Financing Districts are pledged to the payment of the Bonds, Parity Bonds or Subordinate Bonds (if any). However, the portions thereof not required to fund debt service on the Bonds, Parity Bonds or Subordinate Bonds, or necessary to fund surplus funds or reserve funds in accordance with the 2010 Indenture, the 2014 Indenture and the Indenture, are anticipated to be available to fund other costs of the Districts, in accordance with the application of Pledged Revenue provided in the 2010 Indenture, the 2014 Indenture and the Indenture, as more particularly described in THE BONDS Certain Indenture Provisions Flow of Funds. Operational Mill Levy; Funding of Operations Costs The Financing Districts are obligated to fund Service Costs of the Districts to the extent of available revenues in accordance with the Master IGA, as more particularly described in THE DISTRICTS Multiple District Structure; Master IGA Master IGA. Historically, the Financing Districts have not imposed a general fund mill levy but, rather, have funded all administrative and operating costs from the imposition of fees (described in District Fees above) and, in some cases, Developer advances (see THE DISTRICTS Material Agreements of the Districts Reimbursement and Acquisition Agreement ). In accordance with the 2016 budgets for the Financing Districts, the Financing Districts did not impose a general fund mill levy, with the majority of the General Fund budget anticipated to be funded from fees and excess specific ownership taxes. Financial Statements and District Funds The accounts of the Districts are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. Resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. In accordance with Title 29, Article 1, Part 6, Colorado Revised Statutes, as amended, an annual audit is required to be made of the Districts financial statements at the end of the fiscal year unless an exemption from audit has been granted by the State Auditor s Office. The audited financial statements must be filed with the Board within six months after the end of the fiscal year and with the State Auditor 30 days thereafter. Failure to comply with this requirement to file an audit report may result in the withholding of the Districts property tax revenue by the County treasurer pending compliance. 49

56 The financial statements of the Districts for the fiscal year ended December 31, 2015 were audited by L. Paul Goedecke P.C., Certified Public Accountants, Lakewood, Colorado and are appended hereto as APPENDIX A. Historical Financial Information. Set forth hereafter is a comparative statement of revenues, expenditures, and changes in fund balance for each of the Districts governmental funds, as applicable. Such information should be read together with the audited financial statements and accompanying notes appended hereto. Preceding years audited financial statements may be obtained from the sources noted in MISCELLANEOUS Additional Information. District No. 1 Historical Revenues, Expenditures, and Changes in Fund Balances. District No. 1 maintains three governmental funds, a General Fund, a Debt Service Fund and a Capital Projects Fund. The General Fund is the general operating fund of the district and is used to account for all financial resources not accounted for and reported in another fund. The Debt Service Fund is used to account for all the financial resources that are restricted, committed or assigned to expenditures for principal, interest and other debt related costs. The Capital Projects Fund is used to account for all the financial resources that are restricted, committed or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities and other assets. TABLE VII District No. 1-History of General Fund Revenues, Expenditures, and Changes in Fund Balances Revenues Transfers from District No $ 83,351 Transfers from District No ,468 Operational Fees $149,177 $233,307 $349,662 $533, ,984 Sewer Service Fees 47,511 50,792 80, , ,106 Sewer Operations Fees 4,836 16,238 24,239 39,786 51,884 Sewer Administration Fees -- 5,022 11,064 14,964 18,564 Amenity User Fees 41,723 67,361 54,014 96,592 78,522 Miscellaneous -- 2,161 4,590 6,999 7,490 Total Revenues 243, , , , ,369 Expenditures Property Management 16,779 24,240 27,254 37,318 48,431 Accounting and Audit 9,500 9,573 10,681 11,386 12,145 Insurance 19,758 24,379 28,152 28,820 31,414 Legal 7,031 6,330 11,079 11,405 10,679 Grounds 111, , , , ,366 Retreat 114, , , , ,436 Utilities 95, , , , ,340 Sewer 43,028 74, , , ,338 Total Expenditures 417, , , , ,149 Excess (Deficiency) of Revenues Over (Under) Expenditures (174,385) (182,969) (56,117) 74, ,220 Other Financing Sources (Uses) Developer Advances 80, ,025 62, Transfer from Capital Projects Fund -- 25, Total Other 80, ,980 62, Net Change in Fund Balance (94,278) 54,011 6,346 74, ,791 Beginning Fund Balance 95,845 1,567 55,578 61, ,436 Ending Fund Balance $ 1,567 $ 55,578 $ 61,924 $136,436 $248,227 Source: District No. 1 Audited Financial Statements,

57 TABLE VIII District No. 1-History of Debt Service Fund Revenues, Expenditures, and Changes in Fund Balances Revenues Transfers from District No. 2 $ 215,581 $330,017 $ 371,508 $ 435,218 $ 364,270 Transfers from District No , , , , ,815 Reimbursements 12, Investment Income Total Revenues 468, , , , ,283 Expenditures Bond Principal ,000 35,000 45,000 Bond Interest , , , , ,025 Trustee/Paying Agent Fees 2,000 2,000 2,000 2,000 2,000 Total Expenditures 607, , , , ,025 Excess (Deficiency) of Revenues Over (Under) Expenditures (139,010) 53, , ,700 90,258 Net Change in Fund Balance (139,010) 53, , ,700 90,258 Beginning Fund Balance 1,077, , ,334 1,109,840 1,400,540 Ending Fund Balance $ 938,956 $992,334 $1,109,840 $1,400,540 $1,490,798 Source: District No. 1 Audited Financial Statements, TABLE IX District No. 1-History of Capital Projects Fund Revenues, Expenditures, and Changes in Fund Balances Revenues System Development Fees $360,000 $ 532,000 $ 716,000 $ 708,800 $ 572,250 Storm Drainage Fees 90, , , , ,250 Sewer Fees 23,490 34,713 46,719 44,631 37,062 Transfer from District No ,853, Reimbursements 3,298 2, Interest Income ,481 Total Revenues 476, , ,739 9,776, ,043 Expenditures Accounting and Audit 8,001 8,291 12,726 15,544 18,581 Legal 27,654 15,649 40,277 47,395 45,103 Miscellaneous -- 10, ,352 Capital Improvements 791,422 1,249,537 2,529,964 6,291,788 7,201,395 Reimburse Developer Advances -- 2,184 11,458 8,853, Total Expenditures 827,077 1,285,853 2,594,425 15,208,692 7,272,431 Excess (Deficiency) of Revenues Over (Under) Expenditures (350,265) (583,782) (1,652,686) (5,432,280) (6,523,388) Other Financing Sources (Uses) Developer Advances 350, ,737 1,672,686 5,432,280 6,589,586 Transfer to General Fund -- (25,955) Total Other 350, ,782 1,672,686 5,432,280 6,589,586 Net Change in Fund Balance , ,198 Beginning Fund Balance ,000 20,000 Ending Fund Balance $ -- $ -- $ 20,000 $ 20,000 $ 86,198 Source: District No. 1 Audited Financial Statements,

58 District No. 2 Historical Revenues, Expenditures, and Changes in Fund Balances. Over the past five-year period District No. 2 utilized a Debt Service Fund over the period shown and a General Fund for 2015, as set forth hereafter. District No. 2 does not have a Capital Projects Fund. TABLE X District No. 2-History of General Fund Revenues, Expenditures, and Changes in Fund Balances 2015 Revenues Property Taxes $78,078 Specific Ownership Tax 6,380 Interest Income 20 Total Revenues 84,478 Expenditures Transfer to District No. 1 83,351 Treasurers Fees 1,127 Total Expenditures 84,478 Net Change in Fund Balance -- Beginning Fund Balance -- Ending Fund Balance $ -- Source: District No. 2 Audited Financial Statements, TABLE XI District No. 2-History of Debt Service Fund Revenues, Expenditures, and Changes in Fund Balances Revenues Property Taxes $204,065 $312,188 $350,391 $409,450 $546,548 Specific Ownership Tax 14,412 22,264 25,971 31,846 44,663 Interest Income Total Revenues 218, , , , ,350 Expenditures Transfer to District No , , , , ,270 Transfer to District No ,187 Treasurers Fees 3,063 4,687 5,262 6,142 7,893 Total Expenditures 218, , , , ,350 Net Change in Fund Balance Beginning Fund Balance Ending Fund Balance $ -- $ -- $ -- $ -- $ -- Source: District No. 2 Audited Financial Statements,

59 District No. 3 Historical Revenues, Expenditures, and Changes in Fund Balances. District No. 3 utilized a Debt Service Fund over the period shown, a General Fund in 2015 and a Capital Projects Fund in 2014 as set forth hereafter. TABLE XII District No. 3-History of General Fund Revenues, Expenditures, and Changes in Fund Balances 2015 Revenues Property Taxes $79,976 Specific Ownership Tax 6,640 Interest Income 52 Total Revenues 86,668 Expenditures Transfer to District No. 1 85,468 Treasurers Fees 1,200 Total Expenditures 86,668 Net Change in Fund Balance -- Beginning Fund Balance -- Ending Fund Balance $ -- Source: District No. 3 Audited Financial Statements, 2014 and 2015 TABLE XIII District No. 3-History of Debt Service Fund Revenues, Expenditures, and Changes in Fund Balances Revenues Property Taxes $227,276 $312,505 $357,089 $467,097 $559,833 Specific Ownership Tax 16,214 22,737 26,480 35,745 46,484 Transfer from District No ,187 Interest Income Total Revenues 243, , , , ,889 Expenditures Transfer to District No , , , , ,815 Treasurers Fees 3,409 4,688 5,357 7,000 8,403 Bond Interest Series ,425 Miscellaneous Expenses Total Expenditures 243, , , , ,643 Other Financing Sources (Uses) Transfer from Capital Projects ,096 67,246 Net Change in Fund Balance , Beginning Fund Balance ,096 Ending Fund Balance $ -- $ -- $ -- $ 15,096 $ 82,342 Source: District No. 3 Audited Financial Statements,

60 Budget and Appropriation Procedure TABLE XIV District No. 3-History of Capital Projects Fund Revenues, Expenditures, and Changes in Fund Balances Revenues Total Revenues $ -- Expenditures Total Expenditures -- Other Financing Sources (Uses) Bond proceeds 8,715,000 Bond premium 418,902 Bond issuance costs (264,841) Transfer to District No. 1 (8,853,965) Transfer to Debt Service Fund (15,096) Total Other Financing Sources (Uses) -- Net Change in Fund Balance -- Beginning Fund Balance -- Ending Fund Balance $ -- 1 District No. 3 utilized a Capital Projects Fund only for the 2014 fiscal year. Source: District No. 3 Audited Financial Statements, 2014 and 2015 The Districts budgets are prepared on a calendar year basis as required by Title 29, Article 1, Part 1, C.R.S. The budgets must present a complete financial plan for each District, setting forth all estimated expenditures, revenues, and other financing sources for the ensuing budget year, together with the corresponding figures for the previous fiscal year. On or before October 15 of each year, the Districts budget officer must submit a proposed budget to the Board for the next fiscal year. Thereupon notice must be published stating, among other things, that the proposed budget is open for inspection by the public and that interested electors may file or register any objection to the budget prior to its adoption. Before the beginning of the fiscal year, the Board must enact an appropriation resolution which corresponds with the budget. The income of each District must be allocated in the amounts and according to the funds specified in the budget for the purpose of meeting the expenditures authorized by the appropriation resolution. District expenditures may not exceed the amounts appropriated, except in the case of an emergency which was not reasonably foreseeable. Under such circumstances, the Board may authorize the expenditure of funds in excess of the budget by a resolution adopted by a majority vote of the Board following proper notice. If a District receives revenues which were unanticipated or unassured at the time of adoption of the budget, the Board may authorize the expenditure thereof by adopting a supplemental budget and appropriation resolution after proper notice and a hearing thereon. In the event that revenues are lower than anticipated in the adopted budget, the Districts may adopt a revised appropriation resolution after proper notice and a hearing thereon. The transfer of budgeted and appropriated moneys within a fund or between funds may be accomplished only in accordance with State law. 54

61 As available for each District, set forth hereafter is a comparison of each Districts 2017 and 2016 budgets for the General Fund, Debt Service Fund and Capital Projects Fund, as compared to the 2016 year-to-date unaudited actual figures. District No. 1 Budget Summary and Comparisons. TABLE XV District No. 1 General Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Actual (unaudited) 1 Revenues Operational Fees $ 860,000 $ 680,400 $463,992 Sewer Service Fees 210, , ,809 Sewer Operations Fees 69,000 61,511 49,982 Sewer Administration Fees 24,000 21,600 16,530 Landscape fee -- 18, Maintenance fee 20,520 3, Amenity User Fees 65,000 55,000 45,928 Transfer from District No , , ,404 Transfer from District No , , ,120 Transfer from Capital Projects Fund 250, , Miscellaneous ,646 Total Revenues 1,763,292 1,381, ,411 Expenditures Accounting 10,000 20,000 4,166 Audit 10,000 10,000 7,500 Legal 20,000 50,000 13,566 Insurance 65,000 48,000 38,494 Office Administrative 12,000 9, Property Management 48,000 39,600 38,709 Website 5,000 8, Miscellaneous ,918 Grounds 654, , ,041 Retreat 419, , ,380 Sewer Operations 343, , ,721 Utilities 214, , ,420 Reserves 191,000 21, Contingency 8,030 22, Emergency Reserve 54,026 38, Total Expenditures 2,053,936 1,381, ,915 Net Change in Fund Balance (290,644) -- 9,496 Beginning Fund Balance 290, ,229 Ending Fund Balance $ -- $ -- $257,725 1 Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 1 s proposed 2017 budget, 2016 Budget and District No. 1 55

62 TABLE XVI District No. 1 Debt Service Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Actual (unaudited) 1 Revenues Transfer from District No. 2 $ 256,922 $ 405,194 $ 399,544 Transfer from District No , , ,247 Interest Income Total Revenues 606, , ,963 Expenditures Bond Interest , , ,881 Bond Principal ,000 55, Miscellaneous expense 2,000 2, Trustee/Paying Agent Fees 5,000 5,000 2,500 Total Expenditures 665, , ,381 Net Change in Fund Balance (59,082) 277, ,582 Beginning Fund Balance 1,770,922 1,471,085 1,490,799 Ending Fund Balance $1,711,840 $1,749,000 $2,110,381 1 Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 1 s proposed 2017 budget, 2016 Budget and District No. 1 TABLE XVII District No. 1 Capital Projects Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Actual (unaudited) 1 Revenues Developer Advances $9,201,900 $5,690,425 $2,722,704 Development Fees 420, , ,550 Storm Drainage Fees 100,000 75, ,750 Sewer Fees 26,100 19,575 30,015 Interest 1, ,283 CTF income 1, Transfer from District No ,726, Total Revenues 9,750,000 18,826,065 3,315,089 Expenditures Accounting 40,000 16,000 16,664 Legal 80,000 40,000 54,388 Miscellaneous 4,000 4,000 3,319,393 Drainage Improvements 120, ,000 10,842 Lower Pool Access 75,000 75, Capital Expenditures 9,181,000 5,745, Repay Developer Principal 0 12,726, Transfer to General Fund 250, , Total Expenditures 9,750,000 18,826,065 3,401,287 Net Change in Fund Balance (86,198) Beginning Fund Balance ,198 Ending Fund Balance $ -- $ -- $ -- 1 Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 1 s proposed 2017 budget, 2016 Budget and District No. 1 56

63 District No. 2 Budget Summary and Comparisons. TABLE XVIII District No. 2 General Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Actual (unaudited) 1 Revenues Property Taxes $105,277 $-- $-- Interest Income Specific Ownership Taxes 8, Total Revenues 113, Expenditures Treasurer Fees 1, Transfer to District No , Total Expenditures 113, Beginning Fund Balance Ending Fund Balance $ -- $-- $-- 1 Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 2 s proposed 2017 budget, 2016 Budget and District No. 2 TABLE XIX District No. 2 Debt Service Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Actual (unaudited) 1 Revenues Property Taxes $736,942 $821,875 $821,873 Specific Ownership Tax 58,955 65,750 49,442 Interest Income Total Revenues 795, , ,170 Expenditures Transfer to District No , , ,948 Transfer to District No , , ,286 Treasurers Fees 11,054 12,328 10,790 Miscellaneous 4,000 4,000 1,541 Total Expenditures 795, , ,565 Net Change in Fund Balance Beginning Fund Balance Ending Fund Balance $ -- $ -- $ Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 2 s proposed 2017 budget, 2016 Budget and District No. 2 57

64 District No. 3 Budget Summary and Comparisons. TABLE XX District No. 3 General Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Actual (unaudited) 1 Revenues Property Taxes $142,791 $-- $-- Specific Ownership Taxes 11, Interest Income Total Revenues 154, Expenditures Treasurer Fees 2, Transfer to District No , Total Expenditures 154, Net Change in Fund Balance Beginning Fund Balance Ending Fund Balance $ -- $-- $-- 1 Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 3 s proposed 2017 budget, 2016 Budget and District No. 3 TABLE XXI District No. 3 Debt Service Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Budget (unaudited) 1 Revenues Property Taxes $ 999,535 $1,076,692 $1,072,120 Specific Ownership Tax 79,964 75,368 64,585 Transfer from Capital reserve -- 1,253, Transfer from Capital capitalized interest , Transfer from District No. 2 (pledge) 523, , ,286 Interest Income ,100 Total revenues 1,603,666 3,145,700 1,490,091 Expenditures Bond Interest Expense , , ,872 Bond Principal 2014 Bonds 175, , Bond Interest Expense , Bond Principal 2016 Bonds 170, , Transfer to District No , , ,247 Transfer to District No. 1 Contractual , ,120 Treasurers Fees - Debt 14,993 14,132 14,076 Treasurers Fees Contractual -- 2,019 2,011 Miscellaneous 2,000 2, Total expenditures 1,710,558 1,268, ,326 Net Change in Fund Balance (106,892) 1,939, ,765 Beginning Fund Balance 1,334,841 62,800 82,342 Ending Fund Balance $1,227,949 $1,939,686 $ 695,107 1 Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 3 s proposed 2017 budget, 2016 Budget and District No. 1 58

65 TABLE XXII District No. 3 Capital Projects Fund Budget Summary and Comparison 2017 Budget (adopted) 2016 Budget (adopted) 2016 Actual (unaudited) 1 Revenues Bond Proceeds $-- $14,950,000 $-- Total Revenues -- 14,950, Expenditures Issuance Costs , Transfer to District No ,726, Transfer to Debt Service Fund - Reserve -- 1,253, Transfer to Debt Service Fund Cap Interest , Total Expenditures -- 14,950, Net Change in Fund Balance Beginning Fund Balance Ending Fund Balance $-- $ -- $-- 1 Unaudited actual figures through September 30, These are the most recent figures available. Source: District No. 3 s proposed 2017 budget, 2016 Budget and District No. 3 Limitation on Certain Tax Revenues. It is through the preparation of the budget and by taking into consideration all sources of revenue, costs of construction, expenses of operating the Districts, and the debt service requirements of the Districts outstanding bonds and other obligations that the rate of mill levy is determined each year. Pursuant to the provisions of Section 20 of Article X of the Colorado Constitution (defined herein as TABOR), the Districts are subject to tax revenue limitations as described in Constitutional Amendment Limiting Taxes and Spending below. Deposit and Investment of District Funds State statutes set forth requirements for the deposit of the Districts funds in eligible depositaries and for the collateralization of such deposited funds. The Districts also may invest available funds in accordance with applicable State statutes. The investment of the proceeds of the Bonds also is subject to the provisions of the Internal Revenue Code. See the notes to District No. 1 s audited financial statements attached as APPENDIX A hereto. See TAX MATTERS. Risk Management The Board acts to protect the Districts against loss and liability by maintaining certain insurance coverages which the Board believes to be adequate. Currently, the Districts maintain insurance through the Colorado Special Districts Property and Liability Pool ( CSDPLP ). CSDPLP was established by the Special District Association of Colorado in 1988 to provide special districts with general liability, auto/property liability, and public officials liability insurance coverage as an alternative to the traditional insurance market. Since 2001, CSDPLP has also offered workers compensation insurance. The Districts current policy expires on January 1, However, there can be no assurance that the Districts will continue to maintain their current levels of coverage. 59

66 Constitutional Amendment Limiting Taxes and Spending On November 3, 1992, Colorado voters approved an amendment to the Colorado Constitution, which is commonly referred to as the Taxpayer s Bill of Rights, or TABOR, and now constitutes Section 20 of Article X of the Colorado Constitution. TABOR imposes various limits and new requirements on the State and all State local governments which do not qualify as enterprises under TABOR (each of which is referred to in this section as a governmental unit ). Any of the following actions, for example, now requires voter approval in advance: (a) any increase in a governmental unit s spending from one year to the next in excess of the rate of inflation plus a growth factor based on (i) for the State, the percentage change in State population; (ii) for a school district, the percentage change in student enrollment; and (iii) for any other local government, the net percentage change in actual value of all real property from construction of taxable real property improvements, minus destruction of similar improvements, and additions to, minus deletions from, taxable real property; (b) any increase in the real property tax revenues of a local governmental unit (not including the state) from one year to the next in excess of inflation plus the appropriate growth factor referred to in (a) above; (c) any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, extension of an expiring tax or a tax policy change directly causing a net tax revenue gain; and (d) except for refinancing bonded indebtedness at a lower interest rate or adding new employees to existing pension plans, creation of any multiple fiscal year direct or indirect debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years. Elections on such matters may only be held on the same day as a state general election, at the governmental unit s regular biennial election or on the first Tuesday in November of odd numbered years, and must be conducted in accordance with procedures described in TABOR. Revenue collected, kept or spent in violation of the provisions of TABOR must be refunded, with interest. TABOR requires a governmental unit to create an emergency reserve of 3% of its fiscal year spending in 1995 and subsequent years. TABOR provides that [w]hen [a governmental unit s] annual revenue is less than annual payments on general obligation bonds, pensions, and final court judgments, the [voter approval requirement for mill levy and other tax increases referred to in clause I of the preceding paragraph and the voter approval requirement for spending and real property tax revenue increases referred to in clauses (a) and (b) of the preceding paragraph] shall be suspended to provide for the deficiency. The preferred interpretation of TABOR shall, by its terms, be the one that reasonably restrains most the growth of government. De-Brucing. At the 2006 Election, voters of the Districts approved election questions allowing the Districts to collect, retain and spend the full amount of all taxes, tax increment revenues, tap fees, park fees, facility fees, service charges, inspection charges, administrative charges, grants or any other fee, rate, toll, penalty, or charge authorized by law or contract to be imposed or collected by the Districts during fiscal year 2006 and each fiscal year thereafter for as long as the Districts continue in existence, without regard to any spending, revenue raising, or other limitation contained within TABOR. DEBT STRUCTURE The following is a discussion of the Districts authority to incur general obligation indebtedness and other financial obligations and the amount of such obligations presently outstanding. Required Elections Various State constitutional and statutory provisions require voter approval prior to the incurrence of general obligation indebtedness by the Districts. Among such provisions TABOR requires that, except for refinancing bonded debt at a lower interest rate and employee pension plan additions, the Districts 60

67 must have voter approval in advance for the creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years. See FINANCIAL INFORMATION OF THE DISTRICTS Constitutional Amendment Limiting Taxes and Spending. General Obligation Debt Statutory Debt Limit. The Financing Districts are subject to a statutory debt limitation established pursuant to (6), C.R.S. Said limitation provides that, with specific exceptions, the total principal amount of general obligation debt issued by a special district shall not at the time of issuance exceed the greater of $2,000,000 or 50% of such district s assessed valuation. The Bonds will be rated in one of the four highest investment grade rating categories by one or more nationally recognized organizations which regularly rate such obligations, an exception set forth in the statute, and thus are not subject to such statutory limitations. Outstanding and Authorized but Unissued Debt. At the 2006 Election, the qualified electors for each of the Districts voting at such election approved indebtedness for each of the Districts of $60,000,000 for public improvements in each of 10 infrastructure categories for a total of $600,000,000 in total debt authorization for each of the Districts (excluding refunding authorization), and a maximum repayment cost for such indebtedness of $4,920,000,000 for each of the Districts. Such authorization for the Districts was decreased by the original principal amount of District No. 1 s Tax Supported Revenue Bonds, Series 2009 ($7,000,000) and, with respect to the Financing Districts only, District No. 3 s Series 2014 Bonds ($8,715,000), resulting in remaining voter authorization of $584,285,000 for each of the Financing Districts. Such authorization for each of District No. 2 and District No. 3 is expected to be further reduced by the principal amount of the Bonds. The Districts have also each obtained voter authorization at the 2006 Election for the issuance of indebtedness to refund previously incurred obligations (including at a higher interest rate) in the amount of $120,000,000, with a maximum repayment cost of $984,000,000. Such authorization for the Districts was decreased by the original principal amount of District No. 1 s Tax Supported Revenue Refunding Bonds, Series 2010 ($8,350,000), resulting in remaining voter authorization for refundings of $111,650,000 for each of the Districts. The Bonds and the obligations to provide for the payment thereof and the payment of the Series 2010 Bonds and Series 2014 Bonds in accordance with the Funding Agreements constitute the only outstanding indebtedness of the Financing Districts. The Service Plan currently establishes that all of the Districts collectively may not issue Debt (defined, generally, as general obligation debt or revenue debt not subject to annual appropriation) in excess of $91,000,000 (with a total of $21,000,000 permitted to be funded with revenue debt for payment of Regional Improvements, as defined in the Service Plan, and $70,000,000 funded with either general obligation debt or revenue debt that is payable from a District Capital Fee, as defined in the Service Plan), without approval from the City. The Districts have not previously issued any such Debt for the purpose of funding costs of Regional Improvements. District No. 3 has no present plans for the issuance of additional bonds, but may do so to reimburse additional costs of public infrastructure funded by the Developer to the extent an increase in assessed valuation of the Financing Districts permits satisfaction of the coverage tests required for the issuance of Parity Bonds under the Indenture. The issuance of additional indebtedness is subject to certain limitations of the Indenture and the Funding Agreements. See THE BONDS Certain Indenture Provisions Additional Obligations. For information concerning the Master IGA pursuant to which the Financing Districts may be required to impose additional ad valorem property taxes, see THE DISTRICTS Multiple District Structure; Master IGA Master IGA. See also RISK FACTORS and FINANCIAL INFORMATION OF THE DISTRICTS Constitutional Amendment Limiting Taxes and Spending. 61

68 General Obligation Debt Ratios The following are selected general obligation debt ratios for the Financing Districts collectively (considering the combined assessed valuations of District No. 2 and District No. 3) for the past five years. The obligations of the Financing Districts to provide for the payment of the Bonds, the Series 2014 Bonds and the Series 2010 Bonds constitute limited tax general obligations of the Financing Districts, the principal amount of which, for purposes of the ratios below, is assumed to equal the total principal amount of the Bonds outstanding. Prospective purchasers are cautioned that each Financing District is only required to impose, for the payment of the Bonds, the Series 2014 Bonds and the Series 2010 Bonds, the District No. 2 Required Mill Levy or the District No. 3 Required Mill Levy, as applicable, and in no event is such mill levy to exceed 50 mills, subject to adjustment as described herein. See INTRODUCTION Debt Ratios for general obligation debt ratios for the Financing Districts upon issuance and delivery of the Bonds. TABLE XXIII Financing Districts Historical Debt Ratios Fiscal Years Ended December General Obligation Debt Outstanding $8,350,000 $8,350,000 $8,325,000 $17,005,000 $16,960,000 Estimated Population ,495 1,545 1,860 Debt Per Capita $55,667 $10,802 $5,569 $11,006 $9,118 District Assessed Value $21,215,782 $23,588,979 $29,234,033 $31,614,005 $47,464,192 Ratio of Debt to Assessed Value 39.36% 35.40% 28.48% 53.79% Personal Income Per Capita (Jefferson County) $45,302 $47,119 $50,035 $52,687 $54,773 Ratio of Debt Per Capita to Personal Income Per Capita (Jefferson County) % 22.92% 11.13% 20.89% 16.65% 1 Includes the outstanding principal amount of District No. 1 s Series 2010 Bonds, the payment obligations with respect to which under the 2010 Funding Agreement constitute limited tax general obligations of the Financing Districts, and the Series 2014 Bonds, which constitute limited tax general obligations of District No. 3 (in accordance with the 2014 Indenture) and District No. 2 (in accordance with the 2014 Funding Agreement). 2 Population estimate based on 2.5 persons per household in the City, as provided by the U.S. Census Bureau, times the estimated number of occupied homes within the Financing Districts. Figures have been rounded. Sources: Jefferson County Assessor s Office, Financing Districts Audited Financial Statements, ; State of Colorado, Division of Property Taxation, Annual Reports ; Regional Economics Information System Bureau of Economic Analysis; the State Division of Local Governments; and the Financing Districts Estimated Overlapping General Obligation Debt. Certain public entities whose boundaries may be entirely within, or only partially within the Financing Districts are also authorized to incur general obligation debt, and to the extent that properties within the Financing Districts are also within such overlapping public entities such properties will be liable for an allocable portion of such debt. For purposes of this Official Statement, the percentage of each entity s outstanding debt chargeable to the Financing District property owners is calculated by comparing the assessed valuation of the portion overlapping such Financing District to the total assessed valuation of the overlapping entity. To the extent the Financing District s assessed valuation changes disproportionately with the assessed valuation of overlapping entities, the percentage of general obligation debt for which the Financing District s property owners are responsible will also change. The following table sets forth the estimated 62

69 overlapping general obligation debt collectively chargeable to properties within the Financing Districts as of the date of this Official Statement, based upon considering the collective assessed valuation of the Financing Districts, and does not reflect the smaller amount thereof that would actually be attributable to properties within each of the Financing Districts. TABLE XXIV Estimated Overlapping General Obligation Debt Estimated Net Debt Outstanding General Chargeable to Properties in the District Overlapping Public Entity Obligation Debt Percent Amount District No. 2 Jefferson County School District No. R-1 $429,115, % $ 1,201,522 Mount Carbon Metropolitan District 1 16,995, ,041,125 West Metro Fire Protection District 30,495, ,069 Total District No. 2 $8,431,716 District No. 3 Jefferson County School District No. R-1 $429,115, % $ 1,630,637 Mount Carbon Metropolitan District 1 16,995, ,549,621 West Metro Fire Protection District 30,495, ,158 Total District No. 3 $11,436,416 Total Financing Districts $19,868,132 1 In 1997, Mt. Carbon filed for protection under Chapter 9 of the U.S. Bankruptcy Court. In 2004, bonds were issued by Mt. Carbon (the Mt. Carbon 2004 Bonds ) to consummate and effectuate the terms for Mt. Carbon s Seventh Amended Plan for Adjustment of Debts. Subsequently, all property within the boundaries of the Districts was excluded from Mt. Carbon. However, all such property excluded from the boundaries is to continue to be subject to a mill levy of 20 mills for debt service for the payment of the Mt. Carbon 2004 Bonds, which obligation terminates upon the earlier of the payment in full of the Mt. Carbon 2004 Bonds or June 2, Such property will not be subject to a mill levy for the payment of any additional debt issued by Mt. Carbon, if any. As of March 2013, Mt. Carbon had general obligation indebtedness (comprised of the Series 2004 Bonds) outstanding in the aggregate principal amount of $16,000,000. Although the principal amount of such indebtedness may have been reduced as a result of subsequent payment, more recent information as to the outstanding principal amount of such debt is not available to the Districts. Source: Jefferson County Assessor s Office and individual taxing entities Sovereign Immunity LEGAL MATTERS The Governmental Immunity Act, Title 24, Article 10, Part 1, Colorado Revised Statutes, as amended (the Governmental Immunity Act ), provides that, with certain specified exceptions, sovereign immunity acts as a bar to any action against a public entity, such as the Districts, for injuries which lie in tort or could lie in tort. The Governmental Immunity Act provides that sovereign immunity does not apply to injuries occurring as a result of certain specified actions or conditions. In general, public entities will be held liable for willful and wanton acts or omissions or willful and wanton acts or omissions of its public employees which occurred during the performance of their duties and within the scope of their employment. However, if a plaintiff can meet the burden of proof required to show that any one of the exceptions specified in the Governmental Immunity Act applies, the public entity may be liable for 63

70 injuries arising from an act or omission of the public entity, or an act or omission of its public employees, which was not willful and wanton, and which occur during the performance of their duties and within the scope of their employment. The maximum amounts that may be recovered under the Governmental Immunity Act, whether from one or more public entities and public employees, are as follows: (a) for any injury to one person in any single occurrence, the sum of $350,000; and (b) for an injury to two or more persons in any single occurrence, the sum of $990,000, except in such instance, no person may recover in excess of $350,000. Suits against both the Districts and a public employee do not increase such maximum amounts which may be recovered. The Districts may not be held liable either directly or by indemnification for punitive or exemplary damages. In the event that the Districts is required to levy an ad valorem property tax to discharge a settlement or judgment, such tax may not exceed a total of ten mills per annum for all outstanding settlements or judgments. The Districts may be subject to civil liability and may not be able to claim sovereign immunity for actions founded upon various federal laws. Examples of such civil liability include, but are not limited to, suits filed pursuant to 42 U.S.C. Section 1983 alleging the deprivation of federal constitutional or statutory rights of an individual. In addition, the Districts may be enjoined from engaging in anticompetitive practices which violate the antitrust laws. However, the Governmental Immunity Act provides that it applies to any action brought against a public entity or a public employee in any Colorado State court having jurisdiction over any claim brought pursuant to any federal law, if such action lies in tort or could lie in tort. Recent Court of Appeals Case and Legislation Relating to District Elector Qualification On April 21, 2016, the Colorado Court of Appeals issued an opinion in the case Landmark Towers Association, Inc. v. UMB Bank, n.a., 2016 WL (Colo. App. Apr. 21, 2016) (referred to herein as Marin ). One of the issues addressed in the Marin decision is the eligibility of persons holding contracts to purchase property within a special district to vote in special district elections, including elections held for purposes of TABOR. The Marin litigation was filed by homeowners seeking to recover taxes paid to the Marin Metropolitan District (the Marin District ) and to enjoin the future levying of taxes on the basis that the persons who approved the Marin District s debt and taxes (the Organizational Electors ) were not eligible electors. The Court determined that the Organizational Electors contracts to purchase property were invalid based upon certain factors. The Court also held that prospective homeowners who had entered into contracts to purchase condominium units in the Marin District were eligible electors who should have been allowed to participate in the organizational election. As a result, the Court held that the Marin District s TABOR election was conducted illegally and the taxes authorized by such election to pay the Marin District s bonds were levied illegally. On November 7, 2016, the Colorado Supreme Court granted the petition filed by the Marin District and other defendants for writ of certiorari and has agreed to hear the appeal of the Marin decision. In response to the Marin decision, the Colorado General Assembly unanimously passed Senate Bill ( SB 211 ), which was signed into law by the Governor on May 18, SB 211 states that no special district election conducted on or before May 3, 2016, may be contested on the grounds that any person who voted at such election was not an eligible elector, unless such a contest was pending on or before April 21, 2016, or for those elections occurring on May 3, 2016, was initiated within the time periods specified in SB 211. It also validates the qualifications of all board members appointed or elected on or before May 3, 2016, and all actions undertaken by any board member appointed or elected on or before May 3, SB 211 also states that the foregoing bar to election contests does not apply to challenges of elections held after January 1, 2012 on the grounds that federal or state constitutional rights of the eligible electors were violated nor to any challenges initiated prior to April 21, 2016, with respect to elections held before January 1, SB 211 has not been applied or interpreted by any court and 64

71 there is no guarantee that SB 211 will effectively bar state or federal constitutional claims filed at any given time. Bond Counsel has concluded, and will provide an opinion to the effect that, the Bonds constitute valid and binding limited tax general obligations of the District, payable solely from the Pledged Revenue, and that all of the taxable property of the District is subject to the levy of an ad valorem tax in the amount of the Required Mill Levy. See APPENDIX D FORM OF BOND COUNSEL OPINION. In addition, Bond Counsel has concluded and will provide an opinion to the effect that, the 2014 Funding Agreement constitutes a valid and binding limited tax general obligation of District No. 2. Legal Representation Legal matters incident to the authorization and issuance of the Bonds are subject to approval by Greenberg Traurig LLP, Denver, Colorado, as Bond Counsel to District No. 3. A form of the approving opinion to be delivered by Bond Counsel is attached hereto as Appendix D. Certain matters will be passed on by White Bear Ankele Tanaka & Waldron Professional Corporation, Centennial, Colorado, as General Counsel to the Districts. Kutak Rock LLP, Denver, Colorado, is acting as Counsel to the Underwriter and, in such capacity, has assisted in the preparation of this Official Statement. The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to legal issues expressly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of the result indicated by that expression of professional judgment, or of the transaction on which the opinion is rendered, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Pending and Threatened Litigation Involving the Financing Districts In connection with the issuance of the Bonds, General Counsel to the Financing Districts is expected to render an opinion stating that, to the best of its knowledge, there is no action, suit, proceeding, inquiry or investigation pending in which the Financing District is a party. In addition, it is also anticipated that, in connection with the issuance of the Bonds, each of the Financing Districts will execute a certificate stating that there is no action, suit or proceeding now pending or, to the best knowledge of the Financing District, threatened, against the Financing District wherein an unfavorable decision, ruling, or finding would materially and adversely affect the financial condition or operations of the District, District No. 3 s power to issue and deliver the Bonds, or the Financing District s power to execute and perform the obligations of the Indenture (with respect to District No. 3 only) and the 2014 Funding Agreement, including to levy the District No.2 Required Mill Levy or the District No. 3 Required Mill Levy, as applicable. Indenture Irrepealable The Indenture provides that after any of the Bonds are issued, such Indenture shall remain irrepealable, but amendable in certain circumstances, until the Bonds and the interest accruing thereon shall have been fully paid, satisfied, and discharged. 65

72 Future Changes in Laws Various Colorado laws and constitutional provisions apply to the imposition, collection, and expenditure of ad valorem property taxes and the operation of the Districts. There is no assurance that there will not be any change in the interpretation of, or additions to applicable laws, provisions, and regulations which would have a material effect, directly or indirectly, on the affairs of the Districts and the imposition, collection, and expenditure of ad valorem property taxes and fees. Limitations on Remedies Available to Bondholders The enforceability of the rights and remedies of the Owners, and the obligations incurred by District No. 3 in issuing the Bonds, are subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers granted to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights. General TAX MATTERS The Code includes requirements which the District must continue to meet after the issuance of the Bonds in order that the interest on the Bonds be and remain excludable from gross income for federal income tax purposes. The District s failure to meet these requirements may cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. The District has covenanted in the Indenture to take the actions required by the Code in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds. In the opinion of Bond Counsel, assuming the accuracy of certain representations and certifications of the District and continuous compliance by the District with the tax covenants referred to above, under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excludable from gross income for federal income tax purposes. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bond Counsel is further of the opinion that interest on the Bonds is exempt from Colorado income taxes and is not a specific preference item for purposes of the State of Colorado alternative minimum income tax for any period during which interest on the Bonds is not included in gross income for federal income tax purposes. Except as described above, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the receipt or accrual of the interest on the Bonds, or the ownership or disposition of the Bonds. Prospective purchasers of Bonds should be aware that the ownership of Bonds may result in other collateral federal tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds, (ii) the reduction of the loss reserve 66

73 deduction for property and casualty insurance companies by 15 percent of certain items, including the interest on the Bonds, (iii) the inclusion of the interest on the Bonds in the earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (iv) the inclusion of the interest on the Bonds in the passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year and (v) the inclusion of interest on the Bonds in the determination of the taxability of certain Social Security and Railroad Retirement benefits to certain recipients of such benefits. The nature and extent of the other tax consequences described above will depend on the particular tax status and situation of each owner of the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors as to the impact of these other tax consequences. Bond Counsel s opinions are based on existing law, which is subject to change. Such opinions are further based on factual representations made to Bond Counsel as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel s attention, or to reflect any changes in law that may thereafter occur or become effective. Moreover, Bond Counsel s opinions are not a guarantee of a particular result, and are not binding on the IRS or the courts; rather, such opinions represent Bond Counsel s professional judgment based on its review of existing law, and in reliance on the representations and covenants that it deems relevant to such opinion. Original Issue Premium The Bonds maturing prior to December 1, 2021 (the Noncallable Premium Bonds ) and the Bonds maturing on and after December 1, 2021 (the Callable Premium Bonds ) were sold at a price in excess of the amount payable at maturity in the case of the Noncallable Premium Bonds or their earlier call date in the case of the Callable Premium Bonds. Under the Code, the difference between the amount payable at maturity of the Noncallable Premium Bonds and the tax basis to the purchaser and the difference between the amount payable at the call date of the Callable Premium Bonds that minimizes the yield to a purchaser of a Callable Premium Bond and the tax basis to the purchaser (other than a purchaser who holds a Noncallable or Callable Premium Bond as inventory, stock in trade or for sale to customers in the ordinary course of business) is bond premium. Bond premium is amortized for federal income tax purposes over the term of a Noncallable Premium Bond and over the period to the call date of a Callable Premium Bond that minimizes the yield to the purchaser of the Callable Premium Bond. A purchaser of a Noncallable or Callable Premium Bond is required to decrease his adjusted basis in the Premium Bond by the amount of amortizable bond premium attributable to each taxable year he holds the Premium Bond. The amount of amortizable bond premium attributable to each taxable year is determined at a constant interest rate compounded actuarially. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Purchasers of the Noncallable or Callable Premium Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of the treatment of bond premium upon sale, redemption or other disposition of Noncallable or Callable Premium Bonds and with respect to the state and local consequences of owning and disposing of Noncallable or Callable Premium Bonds. Information Reporting and Backup Withholding Interest paid on tax-exempt bonds such as the Bonds is subject to information reporting to the Internal Revenue Service in a manner similar to interest paid on taxable obligations. This reporting requirement does not affect the excludability of interest on the Bonds from gross income for federal income tax purposes. However, in conjunction with that information reporting requirement, the Code subjects certain non-corporate owners of Bonds, under certain circumstances, to backup withholding at the rates set forth in the Code, with respect to payments on the Bonds and proceeds from the sale of 67

74 Bonds. Any amount so withheld would be refunded or allowed as a credit against the federal income tax of such owner of Bonds. This withholding generally applies if the owner of Bonds (i) fails to furnish the payor such owner s social security number or other taxpayer identification number ( TIN ), (ii) furnished the payor an incorrect TIN, (iii) fails to properly report interest, dividends, or other reportable payments as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such owner s securities broker with a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding. Prospective purchasers of the Bonds may also wish to consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. Future Legislation On February 23, 2016, the IRS published proposed regulations providing a new definition of political subdivision for purposes of bonds the interest on which is excluded from gross income for federal tax purposes. The proposed regulations require that a political subdivision (i) have the power to exercise at least one sovereign power, (ii) be formed and operated for a governmental purpose, and (iii) have a governing body controlled by or have significant uses of its fund or assets otherwise controlled by a government unit with all three sovereign powers or by an electorate that is not controlled by an unreasonably small number of unrelated electors. On March 9, 2016, the IRS released corrections to the transition rules in the proposed regulations providing that the new definition of political subdivision will not apply to bonds issued prior to the general applicability date, which is a date ninety (90) days after the proposed regulations are published in final form in the Federal Register. Accordingly, the proposed regulations, if finalized in their current form, would not be applicable to the Bonds, but may impact any future series of bonds planned for the District. Rating MISCELLANEOUS S&P Global Ratings ( S&P ) has assigned the rating of BBB to the Bonds, and has indicated such rating has a stable outlook. The rating referenced in the preceding paragraph reflect only the view of such rating agency and any explanation of the significance of the rating (as well as any positive or negative outlooks thereon or potential changes to any rating in the near future) may only be obtained at S&P, 55 Water Street, New York, New York, Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by one or both rating agencies if in their judgment circumstances so warrant. Any downward revision or withdrawal of any such rating may have an adverse effect on the market price of the Bonds. Underwriting The Bonds are being sold by District No. 3 to the Underwriter at a discount of $62,075 pursuant to a bond purchase agreement entered into between the Underwriter and District No. 3. Expenses associated with the issuance of the Bonds are being paid by District No. 3 from proceeds of the Bonds. The right of the Underwriter to receive compensation in connection with the Bonds is contingent upon the actual sale and delivery of the Bonds. The Underwriter has initially offered the Bonds to the public at the prices or yields set forth on the cover page of this Official Statement. Such prices or yields may 68

75 subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other investment banking firms in offering the Bonds to the public. Registration of Bonds Registration or qualification of the offer and sale of the Bonds (as distinguished from registration of the ownership of the Bonds) is not required under the federal Securities Act of 1933, as amended, the Colorado Securities Act, as amended, or the Colorado Municipal Bond Supervision Act, as amended, pursuant to exemptions from registration provided in such acts. DISTRICT NO. 3 ASSUMES NO RESPONSIBILITY FOR QUALIFICATION OR REGISTRATION OF THE BONDS FOR SALE UNDER THE SECURITIES LAWS OF ANY JURISDICTION IN WHICH THE BONDS MAY BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED. The Colorado Municipal Bond Supervision Act, Article 59 of Title 11, C.R.S., (the Act ) generally provides for the Colorado Securities Commissioner (the Commissioner ) to regulate and monitor the issuance of municipal securities by special districts and certain other entities. Among other things, the Act requires that all bonds, debentures, or other obligations (defined in the Act as bonds ) issued by a special district must first be registered with the Commissioner unless exempt under the Act. Exempted from the registration requirement are, among others, an issue of bonds that is rated in one of its four highest rating categories by one or more nationally recognized organization which regularly rate such obligations. The Bonds will be exempt from registration pursuant to said exemption, among others. Undertaking To Provide Ongoing Disclosure Pursuant to the requirements of the Securities and Exchange Commission Rule 15c2 12 (17 CFR Part 240, c2 12) ( Rule 15c2 12 ), District No. 3 and District No. 2 each has covenanted, for the benefit of the holders of the Bonds, to provide certain financial information and other operating data and notices of material events after the Bonds are issued. The forms of District No. 3 s and District No. 2 s Continuing Disclosure Undertakings are attached as APPENDIX B to this Official Statement (the Undertaking ). During the past five years, District No. 3 and District No. 2 did not file certain annual operating data for fiscal years ending December 31, 2014 and 2015, and did not file notice of its failure to provide the aforementioned information on or before the date specified in its prior continuing disclosure undertakings. Such information was filed on behalf of the District on November 22, A failure by District No. 3 or District No. 2 to comply with the Undertakings will not constitute an Event of Default under the Indenture (although Bond owners will have any available remedy at law or in equity). Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. Interest of Certain Persons Named in this Official Statement The legal fees to be paid to Bond Counsel and Underwriter s Counsel are contingent upon the sale and delivery of the Bonds. 69

76 Independent Auditors The basic financial statements of the Districts for the fiscal year ended December 31, 2015, which are appended hereto, have been audited by independent auditor, L. Paul Goedecke P.C., Certified Public Accountants, Lakewood, Colorado, as stated in their reports appearing therein. Such statements have been included without review or consent of the auditor. Additional Information Copies of statutes, resolutions, opinions, contracts, agreements, financial and statistical data, and other related reports and documents described in this Official Statement are either publicly available or available upon request and the payment of a reasonable copying, mailing, and handling charge from the sources noted in the Introduction hereto. [Remainder of Page Intentionally Left Blank] 70

77 Official Statement Certification The preparation of this Official Statement and its distribution have been authorized by the Board. This Official Statement is hereby duly approved by the Board as of the date on the cover page hereof. This Official Statement is not to be construed as an agreement or contract between District No. 3 and the purchasers or owners of any Bond. FOSSIL RIDGE METROPOLITAN DISTRICT NO. 3, in the City of Lakewood, Colorado By Marc Savela President 71

78 APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE DISTRICTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015

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